LIBRARY 

OF  THE 

UNIVERSITY  OF  CALIFORNIA. 

Class 


61ST  CONGRESS! 
2d  Session     \ 


SENATE 


/DOCUMENT 
\     No.  576 


NATIONAL  MONETARY  COMMISSION 


The 


Swedish  Banking  System 


BY 
A.  W.  FLUX 


Washington  :   Government  Printing -Office  :   1910 


NATIONAL  MONETARY  COMMISSION. 


NBLSON  W.  ALDRICH.  Rhode  Island    Chairman. 

EDWARD  B.  VREELAND,  New  York.  Vice-Chairman. 

JULIUS  C.  BURROWS.  Michigan.  JESSE  OvERSTREET.  Indiana. 

EUGENB  HALB.  Maine.  JOHN  W.  WEEKS,  Massachusetts. 

PHILANDER  C.  KNOX.  Pennsylvania.  ROBERT  W.  BONYNGE,  Colorado. 

THEODORE  E.  BURTON,  Ohio.  SYLVESTER  C.  SMITH,  California. 

JOHN  W-  DANIEL.  Virginia.  LEMUEL  P.  PADGETT.  Tennessee. 

HENRY  M  TELLER,  Colorado.  GEORGE  F.  BURGESS,  Texas. 

HERNANDO  D.  MONEY,  Mississippi.     .  ARSENE  P.  Pujo.  Louisiana. 

JOSEPH  W.  BAILEY.  Texas.  ARTHUR  B.  SHELTON,  Secretary. 

A.   PiATT  ANDREW,  Special  Assistant  to  Commission. 


TABLE  OF  CONTENTS. 


Page. 

PREFATORY  NOTE 5 

BIBLIOGRAPHY  OP  WORKS  CONSULTED 9 

INTRODUCTION n 

CHAPTER  I. — Early  history  of  the  Riksbank 13 

II.— The  Enskilda  banks 30 

III. — The  Riksbank  and  its  subordinate  institutions,  1834- 

1875 42 

IV.— The  Enskilda  banks  after  1850 50 

V.— The  later  history  of  the  Riksbank 78 

VI. — Joint-stock  banks 103 

VII. — People's  banks  and  savings  banks 109 

VIII. — The  new  bank  act  and  the  crisis  of  1907 121 

SUPPLEMENTARY  CHAPTER. — The  banks  of  Denmark  and  Norway- _  134 
APPENDIX  I. — Outstanding  note  issues  of  the  banks  in  Sweden, 

1899-1909 153 

II.— (A.)  The  law  for  the  Bank  of  Sweden,  1897 156 

(B.)  Regulations  for  the  conduct  of  its  operations.  __  173 
III. — The  law  relating  to  joint-stock  banks  with  unlim- 
ited liability,  1903 211 

IV. — Forms   for  monthly  and    annual  returns  from  the 

banks 246 

Chart  showing  for  the  Bank  of  Sweden  the  amount  of  the  notes  in 
circulation,  the  inland  bills  discounted,  and  the  gold  held  in 
Sweden  on  the  last  business  day  in  each  week  and  in  each  month 

of  the  years  1904  to  1909 Face  248 


2130^7 


PREFATORY  NOTE. 


In  the  following  pages  an  attempt  is  made  to  trace  so 
much  of  the  history  of  banking  in  Sweden  as  may  serve  to 
throw  light  on  the  way  in  which  the  system  of  note  issues 
by  numerous  privileged  banks  was  developed,  and  thus 
enable  the  problem  presented  by  the  centralization  of 
those  issues,  the  solution  of  which  has  been  but  recently 
achieved,  to  be  appreciated.  In  tracing  this  history  it 
has  been  judged  best  to  assume  that  the  reader  will  care 
comparatively  little  about  the  specification  of  the  details 
of  the  constitutional  and  administrative  arrangements  of 
Sweden,  or  about  place  names,  or  the  names  of  the  men 
who  have  been  leaders  in  the  developments  traced.  It 
may,  however,  be  convenient  to  state  here  that  Sweden 
has  an  area  of  about  173,000  square  miles,  or  about  one- 
seventeenth  part  of  that  of  the  United  States,  while  its 
population  in  1900  was  5,136,000,  or  about  one-fifteenth 
of  that  of  the  continental  United  States,  or,  otherwise 
expressed,  that  its  area  slightly  exceeds  the  combined 
areas  of  Michigan,  Wisconsin,  and  Illinois,  while  its  popu- 
lation in  1900  was  about  five-ninths  of  that  of  these  three 
States.  At  the  end  of  1908  the  population  of  Sweden  was 
somewhat  under  5,500,000,  having  increased  from  about 
1,760,000  in  1750,  2,350,000  in  1880,  and  3,480,000  in 
1850  to  the  figure  named. 


National    Monetary     Commission 

The  population  of  the  towns  amounted  to  very  nearly 
a  quarter  of  the  total  population  in  1908,  having  increased 
to  this  proportion  from  about  10  per  cent  in  1850  and 
slightly  under  10  per  cent  through  nearly  the  whole  of  the 
first  half  of  the  nineteenth  century.  These  broad  facts  as 
to  the  area  and  population  and  the  distribution  of  the 
latter  between  towns  and  rural  districts  may  serve  to 
enable  the  magnitude  of  the  banking  operations  carried 
on  to  be  judged  more  accurately  than  the  simple  statement 
of  the  sums  in  dollars  which  represent  those  operations. 

The  account  here  given  of  Swedish  banking  has  been 
derived  almost  entirely  from  Swedish  sources,  the  works 
which  have  been  found  most  useful  for  the  period  ending 
a  quarter  of  a  century  ago  being  Carl  M.  Rosenberg's 
"Handbok  i  Bankvdsendet"  and  the  report,  issued  in 
1883,  of  a  committee  appointed  by  the  King  to  consider 
what  changes  in  bank  organization  might  be  necessary. 
This  report  contains  a  valuable  summary  of  the  history 
of  the  Bank  of  Sweden  and  its  dependent  organizations 
and  of  the  numerous  schemes  which  were  discussed  by  the 
Swedish  Parliament  for  reforming  the  banking  system. 
Prof.  J.  A.  lyeffler's  monograph,  "Die  Schwedischen  Zet- 
telbanken,"  second  edition,  1879,  also  contains  a  brief  out- 
line of  the  history  of  banking  in  Sweden.  The  writer  has 
not  succeeded  in  procuring  a  copy  of  the  Swedish  edition 
of  this  monograph.  In  addition  to  the  report  of  the  com- 
mittee of  1883  just  mentioned,  a  number  of  other  reports 
of  committees,  the  text  of  the  statutes,  and  official  statis- 
tical publications  have  been  utilized  in  preparing  the  fol- 
lowing chapters. 


The     Swedish     Banking     System 

Considerable  help  has  been  obtained  from  the  work 
entitled  "  Bankpolitik"  by  Prof.  W.  Scharling,  of  Copen- 
hagen, and  from  the  articles  on  banking  in  the  Scandi- 
navian countries  contributed  by  the  same  author  to 
Conrad's  "Handworterbuch  der  Staatsivissenschajten."  A 
list  of  works  consulted,  including  such  accounts  in  the 
English  language  as  could  be  found,  is  given  on  page  9. 

The  writer  desires  to  acknowledge  gratefully  the  assist- 
ance in  pursuing  his  inquiries  received  from  the  United 
States  minister  in  Stockholm,  Mr.  Charles  H.  Graves,  and 
also  to  acknowledge  in  a  special  degree  the  courteous  assist- 
ance rendered  him  by  Herr  C.  A.  Weber,  one  of  the  man- 
aging directors  of  the  Bank  of  Sweden,  and  by  other 
Swedish  bankers  who  kindly  accorded  him  interviews. 

WEYBRIDGE,  SURREY,  December,  1909. 

NOTE. — In  accordance  with  conventions  concluded  between  Denmark, 
Norway,  and  Sweden,  the  coins  of  all  the  three  countries  have  legal  currency 
in  each  of  them.  Since  the  adoption  of  the  gold  standard,  the  currency 
unit  has  been  called  a  krone  (pi.  kroner)  in  Norway  and  Denmark  and  a 
krona  (pi.  kroner)  in  Sweden,  equivalent  in  United  States  currency  to 
26.8  cents. 

In  each  case  the  present  unit  represents  one-fourth  of  the  old  speciesdaler. 

Previous  to  the  adoption  of  the  modern  currency  unit  there  had  been 
used  in  Sweden  a  unit  called  the  riksdaler  riksmynt  (currency  daler)  of  the 
same  silver  content  as  the  krona.  Before  1855  the  riksdaler  banco  (bank 
daler)  had  been  the  unit  in  general  use.  Its  value  was  one  and  one-half 
times  the  currency  daler,  and  had  been  fixed  in  1830  at  Z11A  Per  cent  of  the 
speciesdaler.  Specie  payments  at  this  rate  were  resumed  in  1834. 

In  Norway  and  Denmark  the  currency  daler  had  been  the  rigsbankdaler, 
equivalent  after  the  resumption  of  specie  payments  (in  1842  in  Norway  and 
in  1845  in  Denmark)  to  one-half  the  speciesdaler.  The  new  unit  of  a  krone 
was  thus  one-half  the  value  of  the  currency  unit  previously  in  use  in  Norway 
and  Denmark. 


WORKS  CONSULTED. 


Notes  on  Banking,  by  Sir  R.  H.  Inglis  Palgrave,  in  the  Journal  of  the  Royal 
Statistical  Society,  1873. 

A  History  of  Banking  in  all  the  Leading  Nations.  Edited  by  the  editor  of 
the  Journal  of  Commerce  and  Commercial  Bulletin.  New  York.  1896. 
[Pages  393-402  of  Vol.  IV  relate  to  Sweden.] 

A  History  of  Modern  Banks  of  Issue.     By  C.  A.  Conant. 

Sweden — Its  People  and  its  Industry.  Part  XIV.  Pages  1024-1040. 
Credit  and  Insurance  Establishments.  Edited  by  Gustav  Sundbarg. 
Stockhol  m ,  1 904 . 

The  Centralization  of  Note  Issues  in  Sweden.  By  A.  W.  Flux,  in  the  Yale 
Review.  1903. 

Die  Schwedischen  Zettelbanken.  By  J.  A.  Leffler.  Zweite  Auflage  Leip- 
zig. 1879. 

Handworterbuch  der  Staatswissenschaften.  Article  Banken,  XVI.  Die 
Banken  in  den  Skandinavischen  Staaten.  By  W.  Scharling.  Third 
edition.  1908.  Gustav  Fischer.  Jena. 

Bankpolitik.  By  William  Scharling.  Jena.  1900.  [Pages  261-280,  318, 
333-334.  351-354  relate  to  Sweden.] 

Handbok  i  Bankvasendet.     By   Carl   M.  Rosenberg.     Stockholm.      1878. 

Underdanigt  Betankande  till  Kongl.  Maj.T,  angaende  Kredit-forhallan- 
dernes  och  Lane-anstalternes  ordnande.  Stockholm.  1853.  (Report 
of  Special  Committee  on  Banking.  1853.) 

Underdanigt  Betankande  angaende  Bankvasendet  i  Riket  och  forandrad 
organisation  af  bankanstalterna.  Stockholm.  1860.  (Report  of  Spe- 
cial Committee  on  Banking,  1860.) 

Bankkomitens  underdaniga  Forslag  till  forandrad  Organisation  af  Bankan- 
stalterna. Stockholm.  1883.  (Report  of  Special  Committee  on  Bank- 
ing. 1883.  With  an  appendix  of  statistical  tables.) 

Betankande  afgifvet  den  30  Januari,  1890,  af  den  under  den  5  Oktober, 
1889,  i  Nader  tillsatta  Bankkomit£n.  (Report  of  Special  Committee  on 
Banking.  1890.) 

Betankande  med  Forslag  till  forandrade  Bestammelser  angaende  Riks- 
bankens  Sedelutgifningsratt.  Stockholm.  1900.  (Report  of  Special 
Committee  on  the  Note-Issuing  Rights  of  the  Riksbank.) 

Betankande  angaende  Sveriges  Ofverg&ng  till  ett  nytt  Myntsystem  med 
Guld  sasom  Vardematare.  Stockholm.  1870.  (Report  of  Committee 
on  the  Transition  to  the  Gold  Standard.  1870.) 


National    Monetary     Commission 

The  text  of  the  laws  touching  banking,  from  that  of  1824  to  those  of  1903, 
in  separate  numbers  of  Svensk  Forfattnings-Samling.  (Collection  of 
Swedish  statutes.) 

Lagar,  Instruktioner  och  Reglemente  for  Forvaltningen  af  Sveriges  Riks- 
bank.     Riksdagen.     1907.     (Contains  the  regulations  of  the  Parliament 
for  the  conduct  of  the  business  of  the  Riksbank.) 
Periodical  statistical  reports  of  the  banks,  including — 

Ofversikt  af  Sveriges  Riksbanks  Stallning.  (Annual  Statement  of 
Accounts  of  the  Riksbank.) 

Ofversikt  utvisande  Riksbankens  Tillgangar  och  Skulder.  (Monthly 
Statement  of  Accounts  of  the  Riksbank.) 

Ofversikt  af  de  solidariska  bankbolagens  och  bankaktiebolagens 
bokslut.  (Annual  Summary  of  Capital  and  Profit  and  Loss  Ac- 
counts for  Banks  with  Unlimited  and  with  Limited  Liability.  The 
title  of  this  publication  was  formerly  somewhat  different,  but  the 
scope  was  the  same.) 

Sammandrag  af  de  solidariska  bankbolagens  och  bankaktiebolagens 
uppgifter.  (Monthly  Statement  of  Accounts  of  the  Banks.) 

Uppgifter  om  Hypotheksbanken  och  Hypotheksforeningarna.  (An- 
nual Summary  of  Accounts  of  the  General  Mortgage  Bank  and 
Mortgage  Credit  Associations.) 

Annual  Reports  of  leading  banks  1904-1908. 

Bidrag  till  Sveriges  Officiella  Statistik.  Y.— Sparbanksstatistik. 
I. — Sparbanker.  II. — Postsparbanken.  (Annual  Reports  on  Sav- 
ings Banks  and  on  the  Postal  Savings  Bank.) 

Statistisk  Tidskrift.     (Annual  Official  Abstract  of  Swedish  Statistics.) 

Sveriges  Riksbank  1908.  (The  first  number  of  the  Yearbook  of  the 
Riksbank.) 

Ekonomisk  Tidskrift,  utgifven  af  David  Davidson.  Upsala  and  Stock- 
holm. (A  monthly  economic  journal  issued  since  1899,  in  which 
have  appeared  a  number  of  important  articles  on  banking,  and 
which  gives  regularly  the  weekly  statement  of  the  Banks  of  Sweden 
and  Norway,  the  monthly  statement  of  the  Bank  of  Denmark,  and 
the  figures  of  the  monthly  returns  of  the  principal  Swedish  banks.) 

Svenska  Bankmannaforeningens  Komiterades  Forslag  till  Skiirpta 
Bestammelser  for  vinnanda  af  okad  Kontroll  ofver  arbetet  i  de 
Enskilda  Sedelutgifvande  Bankerna  och  Aktiebankerna.  Stock- 
holm. 1891  (Report  of  Committee  of  the  Swedish  Bankers'  Asso- 
ciation on  Revision  of  the  Banking  Laws.) 

And  a  number  of  pamphlets  discussing  the  questions  relating  to  reforms 
of  the  laws  relating  to  banking,  but  contributing  nothing  directly 
to  the  facts  set  forth  in  this  volume. 


10 


Of 

UNIVERSITY 

Of  / 


THE  SWEDISH  BANKING  SYSTEM 
WITH  SPECIAL  REFERENCE  TO 
THE  ISSUE  OF  PAPER  CURRENCY. 


INTRODUCTION. 

At  the  present  time  the  business  of  banking  in  Sweden 
is  conducted  by  institutions  of  three  classes,  in  addition 
to  those  credit  institutions  which  are  concerned  with  ad- 
vances on  real  estate  and  the  like  rather  than  with  bank- 
ing proper.  These  three  classes  are:  (a)  The  Bank  of 
Sweden  (Riksbank) ;  (6)  joint-stock  banks,  the  liability 
of  whose  ordinary  shareholders  is  not  limited,  whether 
or  not  there  be  associated  with  them  en  commandite 
shareholders  with  limited  liability;  (c)  joint-stock  banks 
of  the  type  familiar  in  most  countries,  all  of  whose  share- 
holders enjoy  the  privilege  of  limited  liability. 

For  the  sake  of  completeness,  mention  should  be  made 
also  of  the  remnant  of  the  people's  banks.  Many  of  these 
are  now  included  either  in  the  second  or  third  of  the 
above  classes;  but  a  few,  doing  business  on  a  quite  modest 
scale,  retain  distinctive  characteristics  and  must  be  con- 
sidered by  themselves.  Savings  banks  also  exist,  and, 
in  their  receipt  of  deposits  and  the  lending  of  their  funds, 
do  work  in  some  measure  of  a  similar  character  to  that 
which  forms  part  of  the  activities  of  ordinary  banks. 
Neither  of  these  classes  of  banks,  however,  has  a  close 

n 


National    Monetary     Commission 

relation  to  the  phases  of  banking  on  which  attention  is 
mainly  centered  in  what  follows,  and  it  will  not  be  neces- 
sary to  devote  much  space  or  a  separate  position  in  the 
general  classification  to  either  people's  banks  or  savings 
banks  any  more  than  to  credit  institutions  whose  func- 
tion is  to  make  advances  on  the  security  of  real  estate, 
whether  urban  or  rural. 

Since  the  ist  of  January,  1904,  the  right  to  issue 
bank  notes,  previously  enjoyed  by  banks  of  the  second 
class,  as  well  as  by  the  Riksbank,  has  been  restricted, 
and  the  paper  currency  is  now  the  monopoly  of  the  cen- 
tral institution.  The  third  class  of  banks  has  never 
enjoyed  the  privilege  of  creating  paper  currency. 

The  peculiar  position  of  the  second  class  of  banks  can 
only  be  understood  by  reference  to  the  history  of  banking 
development  during  the  nineteenth  century.  The  first 
of  these  private,  or  enskilda  a,  banks  was  founded  in  1831, 
and  there  has  been  an  almost  uninterrupted  controversy 
in  reference  to  the  privileged  position  which  was  accorded 
to  the  banks  of  this  type.  Some  of  the  features  of  that 
controversy,  especially  as  illustrated  in  the  legislative 
enactments  relating  to  the  privileges  and  obligations  of 
banks,  are  sketched  in  the  account  which  follows. 

The  third  class  of  banks  has  been  of  continually  grow- 
ing importance  since  the  first  of  them  was  founded  in 
1863. 

o  In  what  follows,  to  avoid  misapprehension,  the  name  "enskilda  bank" 
will  be  used,  as  in  the  Swedish  designation  of  these  banks,  in  place  of  ren- 
dering this  term  by  " private"  or  "independent."  It  will  not  be  necessary, 
perhaps,  to  add  the  qualifying  term  "note  issuing, "  inasmuch  as  other 
joint-stock  banks  than  those  known  as  "enskilda"  banks  have  not  enjoyed 
the  note-issuing  privilege. 

12 


CHAPTER  I. 

EARLY  HISTORY  OF  THE  RIKSBANK. 

The  first  bank  to  be  established  in  Sweden  was  a  private 
institution,  established  under  a  charter  granted  on  No- 
vember 30,  1656,  to  a  certain  John  Palmstruch  (or  Palm- 
struck)  and  his  associates.  The  royal  decree  establish- 
ing Palmstruch 's  bank  was  dated  from  Marienburg  in 
Prussia.  For  half  a  century  various  projects  for  starting 
banks  in  Sweden  had  been  discussed,  and  a  charter  had 
been  granted  ten  years  before  that  now  in  question,  but 
it  had  not  resulted  in  the  actual  commencement  of  bank- 
ing business.  The  charter  of  1656  authorized  a  bank  to 
deal  in  exchange  and  grant  loans  for  the  advantage  of 
commercial  enterprise.  The  offices  were  to  be  in  Stock- 
holm and  other  towns  in  the  Kingdom,  and  the  difficulties 
of  the  copper  currency  constituted  one  of  the  points  in 
reference  to  which  the  new  institution  was  expected  to 
render  much-needed  assistance,  the  banks  of  Amsterdam 
and  Hamburg  serving  as  prototypes  in  framing  the  regu- 
lations for  the  Swedish  institution. 

MacCulloch  states  that  the  funds  for  the  conduct  of  the 
business  of  the  bank  were  procured  by  borrowing  the 
sum  of  300,000  specie  dalers  (say,  the  equivalent  of  $320,000 
United  States  currency)  at  4  per  cent,  but  the  final  au- 
thority for  this  assertion  is  not  given 

The  advances  were  made  on  the  security  of  bullion  or 
other  valuables,  merchandise,  and  also  real  estate.  The 
interest  charged  was  6  per  cent,  with  a  higher  rate  on 

13 


National    M on  et ar y     Commission 

loans  of  small  amount.  The  charter  provided  that  the 
King,  equally  with  other  borrowers,  should  give  security 
for  advances  made,  and  that  he,  like  others,  should  be 
under  obligation  to  make  repayment  within  a  year  and 
six  weeks. 

The  exchange  department  of  the  bank  conducted  a 
deposit  business.  Subject  to  certain  conditions,  deposit- 
ors could  transfer  to  others  sums  standing  to  their  credit, 
or  could  withdraw  them,  the  document  used  for  the  pur- 
pose of  transfer  or  withdrawal  being  designated  a  bank 
note.  L^ater  on  payment  of  bills  of  exchange  for  large 
amounts  was  required  to  be  made  at  the  bank.  The  cus- 
toms revenue  was  to  be  deposited  in  the  bank,  thus  insur- 
ing to  it  some,  if  not  all,  the  banking  business  of  the  Crown. 

In  the  month  following  the  grant  of  the  charter,  a  royal 
decree  ordered  the  division  of  the  profits  of  the  bank 
between  the  Crown,  the  city  of  Stockholm  (where  alone 
an  office  was  established)  and  the  bank.  The  share 
assigned  to  the  bank  was  one-quarter  of  the  net  profits. 
The  same  decree  designates  Palmstruch  as  president  of  the 
company.  In  the  course  of  the  next  year  more  detailed 
regulations  for  the  conduct  of  the  exchange  branch  of 
the  company's  business  were  approved. 

In  August  of  the  year  1661  the  bank  began  to  issue  a 
kind  of  deposit  receipt  for  the  copper  currency  received 
on  deposit.  In  form  it  was  a  simple  acknowledgement 
that  the  holder  had  a  claim  on  the  bank  in  Stockholm  for 
a  certain  sum  of  money.  These  documents  were  called 
credit  notes,  and  soon  won  general  acceptance  as  currency. 
The  charter  conferred  no  powers  for  this  creation  of  paper 
currency,  but  it  is  clear  that  the  Government  acquiesced 

14 


The     Swedish     Banking     System 

in  the  action  of  the  bank.  The  volume  of  issue  before 
long  exceeded  the  value  of  the  coin  held  by  the  bank, 
and  on  the  occurrence  of  a  marked  rise  in  the  value  of  the 
metal,  copper,  of  which  the  metallic  currency  was  made, 
there  was  experienced  a  pressure  of  depositors  to  with- 
draw the  coin  standing  to  their  credit.  As  loans  could 
not  be  called  in  with  sufficient  speed,  the  bank  found 
itself  in  difficulties.  Some  of  the  writers  on  the  subject 
are  of  opinion  that,  contrary  to  the  stipulations  of  the 
charter,  the  Government,  or  some  of  the  members  of  the 
group  which  owned  the  bank,  had  obtained  advances 
without  putting  up  the  required  security.  The  position, 
at  any  rate,  was  such  in  the  year  1664  that  the  Govern- 
ment was  desirous  of  rendering  assistance  to  the  bank, 
and,  with  that  in  view,  an  investigation  of  its  condition 
was  made.  The  Government  undertook  the  settlement 
of  all  the  bank's  business,  including  the  redemption  of 
the  outstanding  notes,  within  a  year,  a  time  limit  which 
was  repeatedly  prolonged.  Meanwhile  the  notes  were 
required  to  be  accepted  at  their  face  value,  both  in  private 
transactions  and  in  official  payments. 

Palmstruch  was  proceeded  against,  but  the  records  of  the 
trial  were  not  made  public.  The  total  loss  was  stated 
at  200,000  dalers  specie,  but  how  far  this  resulted  from 
fraud,  how  far  from  losses  on  loans,  is  not  known.  In  1668 
Palmstruch  was  condemned  to  the  loss  of  the  charter 
privileges  and  ordered  to  make  good  the  losses  resulting 
from  his  conduct  of  the  business.  Failing  in  this,  he  was 
condemned  to  imprisonment  for  life,  but  was  pardoned 
and  set  free  in  1670,  and  died  the  following  year.  His 
associates  escaped  all  punishment,  and,  in  the  face  of  the 

15 


National    M  o  n  et  ar  y     Commission 

secrecy  maintained  in  regard  to  the  matter,  the  conclu- 
sion which  has  suggested  itself  to  writers  discussing  the 
matter  is  that  Palmstruch  did  not  act  without  the  knowl- 
edge or  authority  of  others  in  the  matters  the  blame  for 
which  was  made  to  rest  upon  him  alone. 

It  may  be  mentioned,  before  passing  to  the  next  stage 
in  the  historical  development,  that  in  1665  silver  re- 
placed copper  as  the  basis  of  monetary  valuation,  the  latter 
having  been  established  as  basis  in  1625.  Copper  coin, 
however,  remained  the  principal  currency  in  circulation. 

The  lapse  of  the  privilege  of  banking  accorded  to 
Palmstruch  and  his  associates  did  not  result  in  the  passing 
away  of  the  bank  itself.  After  due  consideration  and 
consultation  with  the  representatives  of  the  different 
classes  into  which  the  people  were  divided  (the  estates 
of  the  realm,  then  four  in  number,  namely,  clergy,  nobility 
and  gentry,  burgesses,  and  peasants)  the  bank  was,  by  a 
royal  rescript  of  September  17,  1668,  placed  under  the 
authority  and  supervision  of  the  Parliament®  (i.  e.,  the 
four  houses  of  representatives  as  above  named) ,  which  pre- 
pared a  set  of  regulations  for  the  conduct  of  its  operations, 
bearing  date  September  22,  1668.  From  that  time  the 
bank  became  Rikets  Stdnders  Bank,  the  Bank  of  the 
Estates  of  the  Realm.  The  authority  and  responsibility 
of  Parliament  in  regard  to  its  operations  became  absolute. 
Neither  King  nor  ministers  had,  or  have,  rights  over- 
riding those  of  the  Parliament,  which  are  jealously 
guarded.  It  is  important  to  bear  in  mind  this  fact,  that 

a  The  peasants'  representatives  refused  to  associate  themselves  with  the 
continuance  of  the  bank,  and  not  till  1800  did  they  share  with  the  other 
three  houses  in  its  management. 

16 


The     Swedish     Banking     System 

the  use  of  the  title  Riksbank,aor  National  Bank,  to  which 
the  earlier  name  was  changed  in  1867,  may  not  suggest  the 
existence  of  a  control  or  responsibility  on  the  part  of  the 
executive  government,  which  is  lacking  in  this  case, 
though  present  in  a  number  of  other  countries  with  central- 
ized national  banks. 

The  bank  was  guaranteed  the  privilege  of  being  the  cus- 
todian of  the  revenue  received  from  customs  dues,  and 
sundry  other  state  revenues,  the  funds  of  various  public 
institutions,  the  revenue  of  the  city  of  Stockholm,  bequests 
and  other  funds,  while  the  King  undertook  not  to  exact 
from  the  bank  overdrafts  on  his  deposit  account.  No 
special  provision  for  supplying  capital  for  the  bank's  opera- 
tions was  made  by  the  Parliament.  The  regulations  for 
the  conduct  of  business  and  the  classes  of  business  under- 
taken, remained  unchanged,  the  Riksbank  being,  in  fact, 
the  direct  continuation  of  the  enterprise  established  under 
Palmstruch.  At  first,  the  two  departments  previously 
existing  were  maintained  as  separate  businesses,  the  loan 
department  accepting  deposits  at  six  weeks'  notice,  for 
which  interest  was  paid.  A  secret  instruction,  however, 
authorized  the  advance  by  the  exchange  department  to 
the  lending  department  of  the  funds  at  its  disposal 
though  on  reasonably  moderate  terms. 

It  would  appear  that  the  bank's  operations  were  expand- 
ing, and  the  benefits  it  afforded  were  appreciated,  up  to 
about  the  end  of  the  seventeenth  century.  In  1 700,  how- 
ever, with  war  in  sight,  depositors  began  to  draw  out  then- 
funds,  in  a  spirit  of  fear,  and  a  committee  of  inquiry  was 

°  The  name  Riksbank  is  used  in  what  follows,  notwithstanding  the  fact 
that  it  was  not  till  1867  that  it  became  the  true  designation  of  the  bank. 

22150 — 10 2  17 


National    M on  et ar y     Commission 

appointed  in  1701  to  examine  into  the  position  of  the 
bank's  business.  Meanwhile,  after  continued  demands 
for  such  extension,  branches  began  to  be  opened,  the  first 
in  1692,  and  others  in  1693  and  1694,  one  in  each  year. 
They  were  not,  however,  maintained  for  very  long,  the 
two  latter  being  closed  in  1702  and  the  former  in  1705. 
Though  three  others  were  projected,  they  were  not  actually 
established. 

Among  the  results  of  the  committee's  inquiries  was  that 
no  part  of  the  funds  of  the  exchange  department  had  been 
lost,  but  that  the  managers  of  the  loan  department  had 
been  compelled  to  restrict  repayments  to  depositors  in 
order  not  to  bring  borrowers  to  ruin  and  expected  within 
a  short  time  to  restore  matters  to  their  normal  condition. 

The  bank,  when  it  passed  under  the  control  of  the  Par- 
liament, had  been  expressly  denied  the  right  to  issue  credit 
notes  to  circulate  as  currency.  The  report  of  the  commit- 
tee of  1701  shows,  however,  the  existence  of  a  system  of 
transfer  notes  in  connection  with  a  special  class  of  accounts 
by  means  of  which  payments  were  effected  between  differ- 
ent places.  The  system  appears  to  have  possessed  the 
more  essential  characteristics  of  the  accepted  check, 
the  transfer  notes  requiring  indorsement  and  bearing  the 
bank's  acknowledgment  of  the  deposit  of  the  sum  repre- 
sented. These  notes  were  drawn  for  not  less  than  100 
dalers  in  silver  (as  already  mentioned  the  riksdaler  was 
the  equivalent,  in  silver  content,  of  about  $1.07  of  United 
States  currency) .  They  were  readily  accepted  for  use  as  a 
circulating  medium,  being,  indeed,  a  necessary  substitute 
for  Palmstruch's  credit  notes.  They  were  accepted  at 
a  premium  of  3  per  cent  as  compared  with  copper  coin. 

18 


The     Swedish     Banking     System 

Their  form  was  that  of  a  deposit  receipt,  and  this  form 
was  retained  when  the  circulating  note  had  ceased  to  be  a 
true  deposit  receipt,  issued  against  and  guaranteed  by  the 
full  equivalent  in  cash  held  by  the  bank,  but  was  a  repre- 
sentative of  the  bank's  credit,  available  as  a  medium  in 
which  advances  could  be  made.  It  was  not  till  1836  that 
the  notes  of  the  bank  were  drawn  in  the  form  of  a  promis- 
sory note  instead  of  that  of  a  deposit  receipt,  and  even 
then  not  in  the  case  of  the  fractional  notes,  since  with- 
drawn. 

Another  form  of  representative  of  debt,  issued  by  the 
bank,  but  not  used  as  circulating  notes,  was  that  known 
as  a  bank -loan  certificate,  issued  against  loans  taken  up  by 
the  bank.  These  are  still  to  be  found  in  small  amounts, 
the  annual  report  of  1908  showing  some  $47,500  worth  as 
still  outstanding,  the  interest  on  which  amounts  to  $2,060. 

The  transfer  notes  were  the  means  by  which  the  bank 
was  led  into  difficulties  on  more  than  one  occasion.  They 
were  issued  in  such  great  volume  that,  when  metallic 
funds  for  foreign  payment  were  needed  by  their  holders, 
it  was  found  that  the  bank  was  not  in  a  position  to  main- 
tain effective  redemption.  The  Government  had  secured 
loans  without  giving  adequate  security  and  came  to  the 
support  of  the  bank  by  constituting  the  transfer  notes  a 
legal  tender  in  1726.  A  renewal  of_^erious  difficulties 
occurred  in  1745,  when  among  the  measures  taken  was  the 
issue  of  notes  representing  12,  9,  and  6  dalers  in  copper 
money,  and  authority  was  given  the  bank  to  cease  the 
redemption  of  notes.  The  fluctuations  in  the  value  of 
copper  were  a  main  cause  of  the  difficulty.  -As  is  stated 
above,  the  value  of  the  currency  was  based  on  silver  from 

19 


National    Monetary     Commission 

1665,  instead  of  on  the  copper  in  use  earlier.  In  1717,  in 
consequence  of  a  rise  in  the  value  of  the  metal  copper,  the 
copper  coin  was  given  a  new  rating,  50  per  cent  above  its 
former  value  in  silver  or  notes. 

As  a  result  of  the  excessive  issues  of  credit  notes,  silver 
reached  a  premium  of  25  per  cent  in  1745,  and  by  1760  the 
premium  on  the  metal  reached  100  per  cent.  The  high 
price  of  the  principal  Swedish  export  commodity — iron- 
affected  the  balance  of  the  foreign  exchanges,  and  at- 
tempts made  by  the  exchange  department  of  the  bank 
to  adjust  the  quotation  were  rendered  fruitless  by  the 
expansion  of  the  loans  of  the  loan  department.  In  1760 
the  Parliament  decided  to  order  a  reduction  of  loans,  but 
it  was  not  long  before  notes  were  once  more  pouring  into 
the  circulation  in  large  quantities,  and  new  measures  had 
to  be  taken  with  the  end  of  restricting  the  amount  of  the 
advances  made.  It  was  announced  that,  after  the  lapse 
of  a  few  years,  the  notes  would  again  be  redeemed  at  par, 
and  this  assurance  to  note  holders  resulted  in  a  temporary 
improvement  in  their  value. 

The  fluctuations  in  the  value  of  the  currency  and  in  the 
policy  of  the  bank  naturally  led  to  discontent  and  dis- 
tress. After  the  King  had  consulted  with  the  bank's 
managers,  representing  the  Parliament,  and  that  body 
had  duly  considered  the  matter,  the  decision  to  accept  the 
depreciation  of  the  notes  was  taken  in  1776,  and  it  was 
decreed  that,  from  the  following  new  year,  they  should  be 
redeemed  at  half  the  amount  in  silver  represented  by  the 
rating  of  1717  on  their  face  value  in  copper.  When  the 
redemption  began,  the  proportion  borne  by  the  metallic 
funds  of  the  bank  to  the  reduced  value  of  the  outstanding 


The     Swedish     Banking     System 

notes  was  that  of  9  to  16.  The  transfer  notes  represent- 
ing copper  currency  were  succeeded  by  notes  representing 
gold  and  silver,  and  in  that  way  the  currency  was  once 
more  regularized.  The  transition  was  assisted  by  favora- 
ble commercial  conditions,  and  not  less  by  restriction  in 
the  loans  made  by  the  bank.  Thus  ended  the  first  period 
of  irredeemability  of  the  bank's  notes,  after  lasting  for 
over  thirty  years. 

During  those  years  a  new  development  in  the  business 
of  the  bank  had,  after  lengthened  consideration,  been 
undertaken.  The  desirability  of  associating  private  capital 
with  the  national  undertaking  had  been  discussed,  and  a 
plan  for  doing  this  duly  matured.  The  method  adopted 
was  to  establish  a  discount  company  composed  of  private 
shareholders,  whose  capital  was  supplemented  by  a  loan 
from  the  bank.  A  royal  charter  for  a  term  of  twelve 
years  was  granted,  on  May  26,  1773,  to  a  company  with  a 
capital  of  400,000  dalers  in  7,200  shares,  to  which  a  loan 
of  100,000  dalers  from  the  funds  of  the  State  was  to  be 
granted  at  3  per  cent.  As  state  funds  were  not  available, 
the  advance  was  made  out  of  the  funds  of  the  bank,  and 
a  further  advance  of  200,000  dalers  at  6  per  cent  was  made 
in  1777.  The  managing  board  was  composed  of  four 
directors  elected  by  the  proprietors,  and  a  supervisor  or 
inspector  was  appointed  by  the  Crown.  The  business 
undertaken  consisted  in  receiving  loans  at  moderate  rates 
from  private  persons,  and  lending  funds  thus  obtained  by 
the  process  of  discounting.  The  discount  of  foreign  bills 
was  already  part  of  the  business  of  the  Riksbank,  but 
domestic  bills  were,  apparently,  not  sufficiently  provided 
for  by  that  institution.  The  new  company  was  not  to 

21 


National    Monetary     Commission 

discount  for  others  than  those  engaged  in  useful  businesses 
or  manufacturing  operations.  In  course  of  time  there  was 
developed  not  only  by  the  new  institution,  but  by  the  Riks- 
bank,  and  by  other  banks  when  they  were  established  later 
on,  an  extensive  system  of  loans  in  small  amounts  against 
the  notes  of  the  borrowers  without  collateral  security. 

When  the  twelve-year  period  of  the  charter  terminated 
it  was  not  renewed,  but  meanwhile  a  similar  privilege  had 
been  granted  to  a  discount  office  in  Gothenburg  on  March 
24,  1783.  In  this  case  the  share  capital  was  not  specific- 
ally determined,  only  the  amount  (100  dalers)  of  each 
share  being  prescribed.  This  institution  was  authorized 
to  establish  current  accounts  for  effecting  payments 
between  its  clients,  charging  a  commission  of  one  per  mille 
on  the  turnover  for  its  services.  Like  the  Stockholm  insti- 
tution, that  in  Gothenburg  did  not  have  its  charter  renewed 
on  the  expiry  of  the  term  of  the  original  grant. 

In  place  of  the  privately  owned  discounting  business, 
there  was  established  in  Stockholm,  in  1787,  a  general 
discount  office,  using  state  funds  solely  for  its  operations, 
the  amount  of  the  capital  being  the  same  as  for  the  earlier 
institution,  and  the  business  of  the  same  class.  It  was, 
however,  permitted  to  this  new  institution  to  make 
advances  secured  by  a  lien  on  rural  real  estate.  The 
management  consisted  of  five  directors  appointed  by  the 
Crown  and  there  was,  as  before,  an  inspector  to  exercise 
supervision  over  the  business.  In  1789  the  unsatisfactory 
condition  of  the  finances  of  the  Kingdom,  resulting  from 
mismanagement  and  the  financial  demands  of  the  war, 
led  to  the  transfer  of  the  management  of  the  public  debt 
to  the  Parliament.  A  national  debt  office  was  estab- 


22 


UNIVERSITY 


The     Swedish     Banking     System 

lished,  which  created  a  new  circulating  medium  in  the 
shape  of  certificates  bearing  interest  at  3  per  cent,  and  of 
small  face  value.  These  certificates,  which  were  accepted 
in  payments  to  the  royal  treasury,  represented  sums 
as  small  as  2>^  dalers,  and  within  a  year  debt  certifi- 
cates were  in  circulation  to  an  amount  represented  by  as 
large  a  face  value  as  that  of  the  total  of  bank  notes  out- 
standing. Already  in  1790  a  premium  of  6  per  cent  was 
established  on  bank  notes  in  terms  of  debt  certificates. 
The  Parliament  which  assembled  in  Gefle  in  1792  decreed 
a  forced  currency  for  the  debt  certificates,  though  with 
the  6  per  cent  allowance  as  compared  with  bank  notes. 
The  debt  certificates  ceased  to  bear  interest  from  this 
date.  After  this,  yet  smaller  denominations  of  certificates 
were  issued,  even  down  to  a  quarter  of  a  daler,  and  their 
value  became  fluctuating,  in  general,  depreciating.  In  1  799 
the  bank  note  was  worth  half  as  much  again  as  the  debt 
certificate  of  the  same  denomination. 

Meanwhile  the  effort  to  associate  private  with  public 
capital  in  banking  enterprise  had  been  renewed.  Perhaps 
a  not  less  important  feature  in  the  establishment  of  the 
discount  agency  chartered  on  October  26,  1789,  was  that 
it  was  to  carry  on  its  loaning  operations  with  the  certifi- 
cates of  the  national  debt  office,  and  thus  might  serve  as  a 
means  of  introducing  them  into  circulation.  The  capital 
was  to  be  provided,  partly  by  a  state  contribution  of 
150,000  dalers  in  debt  certificates,  partly  by  the  subscrip- 
tion of  1,000  shares  at  100  dalers  each.  The  management 
was  to  be  conducted  by  a  board  composed  of  two  share- 
holders' directors  and  three  nominees  of  the  Crown. 
After  a  year's  operations,  as  already  recounted,  the  large 

23 


National    Monetary     Commission 

issues  of  debt  certificates  had  begun  to  produce  a  depre- 
ciation relative  to  bank  notes.  An  internal  loan  failed 
to  relieve  the  situation,  and  the  issues  of  debt  certificates 
proceeded  while  the  State  had  not  funds  with  which  to 
redeem  the  growing  obligations.  The  cessation  of  interest 
and  the  forced  currency  accorded  the  certificates  in  1792 
have  already  been  referred  to.  The  institution  of  1789 
was  brought  to  an  end,  and  the  right  of  conducting  a  dis- 
count business  with  the  certificates  of  the  national  debt 
office  was  made  a  monopoly  of  that  office  itself  by  a  decree 
of  April  n,  1792.  A  new  discount  agency  was  thereupon 
established,  to  the  capital  of  which  the  national  debt  office 
contributed  200,000  dalers  (in  debt  certificates),  adding 
thereto  a  loan  of  100,000  dalers  at  3  per  cent.  The  asso- 
ciation of  private  capital  with  that  of  the  State  was,  how- 
ever, not  abandoned,  as  500  shares  of  100  dalers  each,  to 
be  subscribed  by  private  persons,  formed  part  of  the  plan. 
In  Gothenburg,  too,  there  was  set  up,  in  1797,  a  private 
discount  establishment  employing  debt  certificates  for  its 
advances.  These  various  institutions,  however,  failed  to 
maintain  the  credit  of  the  debt  certificates,  and  in  the  year 
1800  an  arrangement  was  made  with  the  Riksbank  for 
taking  over  the  discounting  business  of  the  national  debt 
office  and  for  redeeming  its  certificates.  Dealing  with 
the  first-named  feature  first,  a  royal  decree  of  August  26, 
1800,  authorized  the  Riksbank  to  establish  a  national 
discount  business  with  a  capital  of  600,000  dalers,  of  which, 
for  the  term  of  the  charter,  namely,  fifteen  years,  one-third 
might  be  subscribed  by  private  persons  in  shares  of  50 
dalers.  These  private  shareholders  were  to  subscribe  for 
their  shares  in  metallic  silver,  and,  further,  to  lend  to  the 

24 


The     Swedish     Banking     System 

bank  an  equal  sum  in  silver  at  the  same  time.  Of  the  six 
directors,  two  were  to  be  shareholders'  elected  representa- 
tives, four  appointed  by  the  board  of  the  Riksbank. 
The  business  to  be  carried  on  was  making  advances  on 
bills  of  exchange  and  shares  and  on  the  security  of  personal 
guaranties,  but  not  on  mortgages  or  on  produce.  The 
enterprise  received  further  support  from  the  bank,  besides 
the  provision  of  capital,  and,  on  the  termination  of  the 
period  of  the  charter,  the  institution  was  continued  without 
the  association  of  private  shareholders  with  the  bank,  in 
accordance  with  regulations  approved  on  February  7,  1816, 
and  under  the  title  of  the  Discount  Agency  of  the  Bank 
of  the  Estates  of  the  Realm. 

In  addition  to  the  discounting  business  in  Stockholm, 
arrangements  were  made,  in  a  decree  of  August  26,  1800, 
for  the  establishment  in  other  centers  of  discounting  busi- 
nesses, in  which,  however,  private  capital  alone  was 
engaged. 

Gothenburg  was  the  seat  of  the  earliest,  its  charter 
dating  from  October  13,  1802,  and  its  share  capital  being 
200,000  dalers.  In  virtue  of  a  charter  dated  February  15, 
1803,  a  similar  business  was  started  in  Malmo  with  a  capi- 
tal of  100,000  dalers,  and  on  July  20,  1805,  a  charter  was 
granted  to  another  in  Abo  with  a  capital  of  150,000  dalers. 
The  capital  was  to  be  subscribed  in  metallic  silver,  in 
exchange  for  which  notes  of  the  Riksbank  were  obtained. 
The  term  for  which  all  three  charters  were  granted  was, 
like  that  in  the  case  of  the  Stockholm  institution,  fifteen 
years.  As  in  the  case  of  some  of  the  earlier  ventures,  these 
provincial  institutions  were  to  be  supported  by  advances 
from  the  bank  at  3  per  cent,  and  the  bank  was  to  share  in 

25 


National    Monetary     Commission 

their  profits  to  the  extent  of  one-third  of  any  excess  over 
7  per  cent.  A  representative  of  the  bank  took  part  in  the 
annual  audit  of  accounts.  A  fourth  discount  business 
was  established  a  few  years  later,  in  association  with  the 
Gotha  Canal  company,  for  whose  advantage  and  assistance 
it  was  chartered  on  April  n,  1810.  Only  shareholders  in 
the  canal  company  could  become  shareholders  in  the  dis- 
count business.  The  term  of  the  charter  was  twenty -five 
years,  of  which  four  were  allowed  for  the  preparatory  oper- 
ations. The  canal  company's  capital  was  also  to  serve  as 
the  capital  of  the  new  establishment,  assistance  being  given 
by  the  Riksbank  in  the  shape  of  a  credit  of  800,000  dalers 
at  3  per  cent,  later  increased  to  4  per  cent.  The  anticipa- 
tions of  profit  led  to  a  subscription  of  over  3,000,000  dalers. 
In  1816  the  credit  at  the  bank  was  doubled  in  amount,  the 
canal  itself  serving  as  security  for  the  advances  made  by 
the  bank.  The  managing  board  of  the  bank  had  the  right 
to  appoint  one  member  on  the  board  of  the  new  discount- 
ing institution,  and  one  of  the  auditors.  The  business 
done  by  all  these  provincial  institutions  consisted  in 
making  advances  on  bills  of  exchange  and  promissory 
notes  for  a  term  not  exceeding  six  months,  and  also  in 
making  loans  for  twelve  months  on  the  security  of  the 
shares  of  well-known  enterprises,  and  in  particular  on 
those  of  the  Gotha  Canal.  The  bank  credit  was  utilized 
by  the  issue  of  drafts  on  the  bank,  the  minimum  of  these 
being  5  dalers,  these  drafts  serving  as  a  circulating  medium. 
Private  persons  also  provided  the  discounting  business 
with  funds,  receiving  from  them  in  exchange  drafts  pay- 
able on  presentation,  these  also  serving  as  a  circulating 
medium.  Many  of  these  represented  small  amounts. 

26 


The     Swedish     Banking     System 

The  excessive  amount  of  the  advances  made  and  the 
unrealizable  nature  of  the  security  in  many  cases,  particu- 
larly in  the  case  of  the  canal  itself,  in  which  much  of  the 
funds  were  sunk,  naturally  led  to  difficulties.  In  the  crit- 
ical times  of  1808  the  institution  at  Abo  had  to  be  liqui- 
dated, and,  though  the  others  were  held  together  for  a  time, 
by  the  autumn  of  1 8 1 7  it  could  no  longer  be  concealed  that 
the  Malmo  business  was  insolvent.  The  audit  of  that  year 
showed  that  a  startling  rashness  had  characterized  the 
conduct  of  affairs,  and  the  loss  to  the  bank  exceeded 
430,000  dalers.  The  fall  of  the  Malmo  business  created 
so  much  distrust  that  both  the  Gothenburg  institutions 
were  also  compelled  to  liquidate,  and  a  special  meeting  of 
the  Parliament  was  summoned  to  deal  with  the  situation. 
The  total  loss  to  the  Riksbank  amounted  to  no  less  than 
1,343,000  dalers.  Private  credit  institutions  could  no 
longer  command  sufficient  public  confidence,  and  the  Par- 
liament resolved  that  the  Riksbank's  discount  agency,  to 
which  reference  has  been  made  above,  should  alone  be 
permitted  to  conduct  the  business  of  discounting  through- 
out the  Kingdom.  One  result  was  the  establishment  in 
1824  of  branches  of  the  Riksbank  in  Gothenburg  and  in 
Malmo. 

In  following  the  course  of  events  in  reference  to  the  dis- 
count institutions,  the  results  of  the  depreciation  of  the 
debt  certificates  have  been  neglected.  It  has  already 
been  noted  that  by  1799  these  debt  certificates  were 
worth  one-third  less  than  the  notes  of  the  bank  of  equal 
face  value.  The  Parliament  of  1800  arranged  for  a  re- 
sumption of  redemption  of  the  debt  certificates,  to  begin 
in  1803.  The  operation  was  to  be  carried  through  by  the 

27 


National    Monetary     Commission 

bank,  which  bound  itself  to  redeem  15,000,000  dalers  of 
debt  certificates  at  a  deduction  of  one-third  from  their  face 
value,  and,  to  the  extent  of  one-third  of  the  total  amount, 
ten-year  bonds  bearing  interest  at  4  per  cent  were  em- 
ployed as  the  equivalent  in  redeeming  the  debt  certifi- 
cates. By  a  foreign  loan  and  in  other  ways  the  cash 
holdings  of  the  bank  were  strengthened  to  meet  the  situa- 
tion. 

The  resumption  of  cash  payments  was  duly  achieved, 
but  the  uncertainties  and  the  financial  drain  of  war  led  to 
a  renewal  of  excessive  issues  of  circulating  paper.  In  1810, 
and  still  more  definitely  in  1813,  the  bank  failed  to  sup- 
ply silver  in  redemption  of  its  obligations,  a  course  which 
a  law  of  1810,  giving  the  notes  of  the  bank  legal  currency 
without  reference  to  their  redemption  on  demand,  per- 
mitted. After  the  fall  of  the  provincial  discount  busi- 
nesses in  1817  the  bank  was,  by  royal  decree,  restrained 
from  the  issue  of  silver;  that  is  to  say,  the  notes  were  not 
permitted  to  be  redeemed.  Overissue  and  depreciation 
followed,  and  the  reestablishment  of  order  in  the  currency 
was  only  effected  at  the  expense  of  the  legal  recognition  of 
the  depreciation  contained  in  the  law  of  ist  March,  1830. 
A  new  redemption  at  37^  per  cent  of  the  face  value  of  the 
notes  was  decreed,  so  that  2^  dalers  in  bank  notes  were 
the  equivalent  of  i  daler  in  specie  (silver).  This  relation 
was  maintained  from  1834,  when  first  the  provisions  of 
the  law  of  1830  were  able  to  be  carried  into  effect,  till  the 
establishment  of  the  gold  standard. 

Hitherto  the  language  employed  has  recognized  but 
one  currency  unit,  the  riksdaler.  After  3834  the  use  of 


The     Swedish      Banking     System 

the  riksdaler  banco  as  well  as  the  riksdaler  species,  and 
also  the  riksdaler  currency,  which  was  the  debt  certifi- 
cate daler,  renders  it  necessary  from  time  to  time  to  em- 
ploy more  than  the  one  simple  term.  It  will  be  conven- 
ient to  restate  here  the  relations  of  the  three  units  and  of 
each  to  the  United  States  dollar.  The  riksdaler  riksmynt, 
or  currency  daler,  which  became  the  legal  currency  unit 
in  1855,  is  perpetuated  in  the  modern  Swedish  currency 
unit,  the  krona  or  crown  (pi.  kronor),  equivalent  to  26.8 
cents  United  States  currency. 

The  riksdaler  banco,  or  bank  daler,  being  one  and  one- 
half  times  the  preceding,  is  40.2  cents  United  States  cur- 
rency. 

The  riksdaler  species,  or  silver  daler,  is  two  and  two- 
thirds  times  the  bank  daler,  or  four  times  the  currency 
daler — that  is  to  say,  is  107.2  cents  United  States  cur- 
rency. 

Since  1834  the  redeemability  of  the  notes  of  the  bank 
has  been  fully  maintained  in  silver  till  1873,  and  since 
that  year  in  gold.  While  the  issue  of  the  small  notes  of 
8,  10,  12,  14,  and  16  skillings  banco  (48  skillings  =  i  riks- 
daler) was  continued,  little  metallic  coin  was  used  in  gen- 
eral circulation,  but  when  their  issue  was  stopped  in  1844 
their  place  was  gradually  taken  by  coin. 

The  later  history  of  Swedish  banking  is  not  disturbed 
by  uncertainties  in  regard  to  the  value  of  the  currency. 
The  question  of  the  policy  of  permitting  private  bank- 
note issues  was,  it  is  true,  the  subject  of  continual  dis- 
cussion and  of  repeated  projects  for  changes  in  the  law, 
but  the  private  issues  did  not,  fortunately,  affect  the 
value  of  the  circulating  paper. 

29 


CHAPTER  II. 


THE  ENSKILDA  BANKS. 

In  the  next  period  of  Swedish  banking  history  we  have 
to  do  with  with  private  institutions  undertaking  all  or- 
dinary banking  functions,  not  merely  with  attempts 
to  supplement  the  operations  of  the  Riksbank  in  certain 
special  directions  by  the  establishment  of  more  or  less 
subordinate  institutions,  such  as  those  whose  rise  and 
fall  have  been  briefly  traced  in  the  foregoing  account. 

It  had  long  been  felt  that  the  banking  requirements 
of  the  country  could  not  be  satisfactorily  met  by  a  single 
central  institution,  and  in  the  attempts  made  to  supple- 
ment its  operations,  particularly  to  provide  facilities 
in  other  centers  than  the  capital,  it  may  be  supposed 
that  this  sentiment  was  an  influential  contributing  factor. 
The  question  occupied  the  attention  of  the  Parliament 
anew  in  1823,  and  the  conclusion  arrived  at  was  that 
the  needs  of  industry  and  commerce  could  be  met  better 
by  the  creation  of  private  enterprises,  to  act  as  inter- 
mediaries between  the  owners  of  surplus  capital  and  those 
who  needed  it  for  use  in  their  undertakings,  than  by 
confining  banking  operations  to  the  publicly  owned 
and  controlled  Riksbank.  The  result  of  the  discussion 
was  the  royal  decree  of  January  14,  1824,  authorizing 
the  establishment  of  private  banks.  The  articles  of 
association  and  the  regulations  for  the  conduct  of  busi- 
ness by  the  new  order  of  banks  were  required  to  be  ap- 
proved by  the  Crown  before  a  charter  was  granted.  The 

30 


The     Swedish      Banking     System 

proposed  rules  and  the  extent  of  the  funds  to  be  used 
were  to  be  such  as  might  be  judged  appropriate  to  the 
object  in  view,  viz,  the  readier  availability  of  private 
funds  for  making  advances  to  assist  commerce,  industry, 
and  agriculture.  In  every  case  a  definite  declaration 
was  required  that  no  aid  from  funds  of  the  State  should 
be  given,  and  that  the  State  should  not  be  involved 
in  the  business  to  be  undertaken  in  any  other  way  than 
in  private  businesses  in  general,  and  should  not  be  called 
upon  for  any  contribution  toward  maintaining  the  bank 
or  rescuing  it  from  difficulties.  The  same  publicity  in 
regard  to  the  constitution  and  purposes  of  the  private 
banks  was  required  as  for  other  companies,  through  ad- 
vertisement in  the  Official  Gazette,  and  these  published 
details  were  to  specify  particularly  such  features  as  the 
unlimited  liability  of  the  shareholders,  who  were  to  be 
jointly  and  severally  liable  for  meeting  the  obligations 
into  which  the  company  should  enter.  The  term  for 
which  charters  should  be  granted  was  not  to  exceed  ten 
year§,  though  a  renewal  might  be  sought  at  the  expiration 
of  the  term.  In  advancing  money  on  loan,  interest  at 
the  maximum  legal  rate  might  be  deducted,  but  not 
for  more  than  a  year — that  is,  the  advances  might  take 
the  form  of  the  discount  of  notes  with  not  exceeding 
one  year's  currency.  The  interest  on  loans  outstanding 
after  the  expiration  of  the  period  for  which  they  were 
granted  was  to  be  at  the  rate  fixed  by  the  discount  agency 
of  the  Riksbank.  Proceedings  to  enforce  repayment 
were  required  to  be  instituted  two  months  after  the  due 
date.  Nearly  seven  years  elapsed  before  any  institution 
of  the  kind  thus  authorized  was  established.  The  first 

31 


National    Monetary     Commission 

charter  was  granted  to  an  association  of  three  persons 
in  Ystad  on  October  14,  1830,  but  the  actual  commence- 
ment of  business  did  not  take  place  till  the  ist  of  April 
following.  A  second  bank  secured  a  charter  in  1832  and 
began  business  in  1833  in  Carlstad.  In  1835  another 
charter  was  granted,  and  under  it  business  was  started 
early  in  1836.  In  1837  three  new  banks  were  started, 
one  of  which  was,  during  the  term  of  its  first  charter,  a 
company  with  limited  liability.  An  interval  of  ten  years 
preceded  the  establishment  of  the  next  two  private  banks 
in  1847  and  1848.  No  more  were  founded  till  1856,  when 
a  private  bank  was  opened  in  Stockholm,  to  be  followed 
by  three  others  in  different  parts  of  the  country  in  1857. 

The  slowness  with  which  the  new  institutions  were  cre- 
ated would  seem  to  suggest  that  the  development  of  the 
country  did  not  call  very  urgently  for  a  widespread  system 
of  bank  offices  at  that  time.  The  growth  of  the  business 
of  the  banks  which  were  started,  however,  was  consider- 
able. At  the  end  of  1850  the  loans  and  discounts  of  the 
enskilda  banks  (to  give  them  the  distinctive  designation 
belonging  to  them,  and  thus  avoid  the  suggestion  that,  as 
private  banks,  they  were  not  joint  stock  institutions) 
amounted  to  16,000,000  of  currency  dalers  (about 
$4,290,000),  while  those  of  the  Riksbank  were  40,500,000 
dalers,  having  increased  in  the  sixteen  years  from  1834  by 
8,500,000.  Besides  the  eight  head  offices,  there  then  existed 
sixteen  branch  offices  or  agencies  of  the  enskilda  banks. 

The  lending  business  of  these  banks  was  modeled  en- 
tirely on  the  lines  of  the  Riksbank's  discount  agency's 
business.  Advances  were  made  on  bills  of  exchange,  on 


The     Swedish     Banking     System 

promissory  notes,  occasionally  on  the  security  of  real  es- 
tate or  of  merchandise,  including  grain,  and  also  by  means 
of  cash  credits.  Funds  for  the  purpose  were  procured 
partly  from  the  subscribed  capital  (though  this  was  very 
moderate  and  not  fully  paid  up) ,  partly  from  deposits  and 
the  balances  of  current  accounts,  and  mainly  by  the  issue 
of  bank  notes.  The  smallest  face  value  of  the  notes 
issued  was  2  bank  dalers  ( =  3  currency  dalers) ,  while  the 
Riksbank  was  issuing,  as  already  mentioned,  fractional 
notes,  and  also  issued  a  note  of  32  skillings  banco  (i  cur- 
rency daler).  The  lack  of  development  of  the  means  of 
communication  enabled  the  notes  to  be  kept  in  circulation 
longer  than  now,  and  thus  rendered  their  issue  a  more  val- 
uable privilege.  No  mention  is  made  of  note  issues  in 
the  decree  of  1824,  but  the  charter  or  articles  of  association 
of  the  individual  banks  provide  for  the  notes,  except  in 
the  case  of  the  two  earliest.  The  omission  of  specific  pro- 
vision in  their  case  did  not,  it  would  appear,  in  any  way 
prevent  the  creation  of  a  note  circulation  by  these  banks. 
In  the  revised  enactment  of  1846  the  subject  of  note 
issues  is  duly  dealt  with.  This  enactment  was  framed  after 
a  discussion  extending  over  many  years,  in  which  some 
urged  the  advantages  of  meeting  the  banking  needs  of 
the  country  by  a  system  of  branches  of  the  Riksbank. 
There  were  complaints  as  to  the  conduct  of  the  enskilda 
banks,  but  the  majority  favored  their  continuance,  and 
regarded  them,  properly  managed,  as  better  able  than 
branches  of  the  Riksbank  to  provide  the  circulating  me- 
dium required  by  the  country.  The  proposals  of  the 
Parliament  were  in  the  main  those  which  are  found  in  the 

22150—10 3  33 


National    M  o  n  et  ar  y     Commission 

royal  decree  of  January  9,  1846,  respecting  enskilda 
banks  which  issue  their  own  credit  notes.  The  new  enact- 
ment deals  with  a  number  of  points  omitted  in  that  of 
1824.  The  principal  of  these  are  the  following: 
'  i.  The  subscribed  capital  was  to  be  at  least  250,000 
silver  dalers;  that  is,  i ,000,000  dalers  currency  ($268,000). 

2.  The  offices,  both  head  and  branch,  were  only  to  be  in 
towns. 

3.  The  articles  of  association  were  to  specify  the  amount 
of  the  capital,  10  per  cent  to  be  paid  up  before  the  bank 
commenced  business,  and  a  further  15  per  cent  within  a 
year,  security  for  this  further  payment  being  demanded. 
The  management,  audits,  publication  of  the  results  of  the 
audit  in  the  Gazette,  general  meetings,  and  regulations  for 
the  making  of  advances,  granting  of  credits,  and  the  ar- 
rangement of  current  accounts  were,  of  course,  all  to  be 
dealt  with  in  the  articles  of  association. 

4.  The  security  for  so  much  of  the  subscribed  capital 
as  was  not  paid  up  might  consist  of  deposits  of  current 
money  or  of  gold  and  silver  bullion  duly  assayed,  and  also 
of  such  real  estate  mortgages  and  bonds  or  shares  of  indus- 
trial enterprises  (but  not  shares  of  any  enskilda  private 
banks)  as  might  be  approved  by  the  company,  an  agent 
of  the  Executive  Government  having  also  the  right  to  be 
associated  with  the  management  of  the  bank  in  deciding 
what  collateral  was  acceptable.     These  securities  were  to 
be  deposited  under  official  charge  in  a  safe,  to  which  a 
public  officer,  as  well  as  the  bank,  controlled  an  independ- 
ent lock.     So  long  as  the  business  of  the  bank   should 


34 


The     Swedish     Banking     System 

continue,  no   diminution   or   repayment  of   capital   was 
permitted. 

5.  The  banks  were  empowered  to  issue  (a)  printed  or 
engraved  credit  notes  bearing  no  interest  and  payable  to 
bearer  on  demand,  of  not  lower  denomination  than  3^ 
bank  dalers  (5  currency  dalers),  and,  from  the  commence- 
ment of  1851,  not  of  lower  denomination  than  6%  bank 
dalers  (10  currency  dalers)  [this  last  provision  was  not  car- 
ried out  in  the  sequel];    (b)  interest-bearing  obligations 
payable  to  bearer  or  to  order  of  not  less  amount  than  500 
currency  dalers;  (c)  deposit  receipts  payable  to  a  definite 
person,  the  transfer  of  which  was  required  to  be  notified 
to  the  bank,  and  bearing  a  specification  to  that  effect  on 
their  face. 

6.  The  department  of  finance  was  to  be  supplied  with 
specimens  of  blank  forms  for  the  credit  notes  referred  to 
in  5$  above,  and  the  names  of  those  whose  signatures  were 
to  be  placed  on  the  notes  were  required  to  be  advertised 
in  the  Official  Gazette. 

7.  Branches  were  to  issue  only  drafts  on  the  head  office 
payable  to  the  person  named  thereon. 

8.  The  maximum  limit  of  the  note  issues  and  draftsmen 
the  Riksbank,  taken  together,  was  to  be  the  amount  of 
the  holding  by  the  enskilda  bank  of  the  following  items: 

(a)  Current  money  of  the  realm  in  silver  or  Riksbank  notes; 

(b)  the  balance  of   funds  deposited  with  the  Riksbank; 

(c)  other  holdings  of  gold  or  silver,  and  the  security  for  cap- 
ital subscribed  but  not  paid  up  which  has  been  specified 
above,  the  bank's  own  loan  obligations  being  excluded; 

(d)  security  held  for  credits   granted,  to  the   extent  to 


35 


National    Monetary     Commission 

which  the  credits  had  been  drawn  upon,  but  not  exceeding 
in  all  one-half  the  bank's  capital. 

In  case  the  limit  should  be  exceeded,  the  excess  was 
required  to  be  adjusted-  within  a  month. 

9.  The  bank  might  not  make  advances  on  the  security 
of  shares  of  enskilda  banks. 

10.  The  banks  might  not  trade  in  other  things  than  gold 
and    silver.     Property    held    as    security    for    advances 
might,  however,  be  taken  over,  conditionally  on  its  being 
realized  as  soon  as  that  could  be  effected  without  loss. 

11.  Shareholders  might  withdraw  from  the  company  or 
transfer  their  shares  only  with  the  assent  of  the  company. 
The  same  rule  applied  to  the  heirs  of  deceased  share- 
holders. 

12.  An  account  of  the  position  of  the  bank's  affairs 
was   to   be   rendered   to   the   Crown    quarterly.     An   in- 
spector   appointed    by    the    local    representative    of    the 
Crown  was  to  take  part  in  the  making  up  of  this  account, 
and  was  also  to  be  entitled  to  inquire  into  the  affairs  of 
the  bank  at  any  time,  with  due  regard  to  the  secrecy  of 
the  relations  of  the  bank  with  its  clients. 

13.  The  Crown  was  to  be  entitled  to  annul  the  charter 
in  case  of  serious  breaches  of  its  provisions. 

The  provisions  of  the  earlier  law  were  to  apply  in  ref- 
erence to  the  liability  of  shareholders  and  the  procedure 
in  respect  of  loans.  The  above  points  are  features  in 
which  the  defects  and  omissions  of  the  previous  law  were 
sought  to  be  remedied. 

The  provision  that  the  banks  should  be  subject,  in 
regard  to  the  term  for  prescription  of  claims,  to  such 


The     Swedish     Banking     System 

regulations  as  might  thereafter  be  made  was  rendered 
definite  by  the  actual  determination,  in  a  royal  ordinance 
of  October  6,  1848,  that  the  ten-year  limit  applicable  in 
ordinary  cases  of  debt  should  not  apply  to  the  notes  of 
enskilda  banks,  with  the  natural  consequence  should  such 
a  bank  go  into  liquidation. 

The  fixation  of  the  minimum  limit  of  an  enskilda  bank's 
capital  at  1,000,000  dalers  currency  ($268,000)  is  a  notable 
feature  of  the  new  legislation.  Of  the  six  banks  chartered 
before  1846,  four  had  started  with  smaller  capitals,  and  one 
still  possessed  a  capital  below  the  new  limit. 

The  proportion  of  the  paid-up  to  the  subscribed  capital 
was  fixed  in  each  case  by  the  articles  of  association,  the 
approval  of  which  by  the  Crown  was  a  condition  of  the 
grant  of  a  charter. 

The  first  of  the  enskilda  banks  was  originally  founded  by 
three  subscribers  who  provided  a  capital  of  400,000  dalers. 
Other  shareholders  were  shortly  afterwards  admitted,  and 
an  arrangement  made  by  which  the  founders  and  the 
4,239  shareholders  were  each  credited  with  a  subscription 
of  317,925  dalers.  The  face  value  of  the  shares  was  150 
dalers,  and  the  total  paid-up  capital  remained  at  400,000 
dalers  till  1841  when,  under  a  renewed  charter,  the  share 
capital  was  reorganized,  the  value  of  each  share  being 
quadrupled,  and,  with  20  per  cent  paid  up,  the  cash  sub- 
scription was  increased  to  405,600  dalers.  The  position 
of  founders  and  other  shareholders  was  thereafter  identical. 
The  second  bank  in  order  of  date  of  foundation  had  one- 
third  of  its  subscribed  capital  paid  up.  The  two  which 


37 


National    Monetary     Commission 

followed  had  30  per  cent  paid  up,  the  next  40  per  cent, 
and  the  sixth  20  per  cent.  These  proportions  were  modi- 
fied after  the  renewal  of  charters  which  took  place  in  1846, 
four  of  the  six  banks  above  referred  to  adopting  the  25  per 
cent  relation  of  paid-up  to  subscribed  capital.  The 
inquiry  by  a  committee  in  1860  showed  that  the  12  banks 
then  existing  had  a  total  subscribed  capital  of  25,000,000 
dalers  currency,  but  the  amount  paid-up  only  slightly 
exceeded  6%  millions.  This  last  figure  leaves,  however, 
out  of  account  a  special  feature  of  three  of  the  twelve 
banks.  The  subscribers  to  their  shares  paid  up  the  entire 
face  value  in  cash,  but  in  two  cases  75  per  cent,  and  in  the 
third  60  per  cent,  of  the  amount  thus  obtained  was  invested 
in  suitable  securities,  mainly  mortagages  on  real  estate,  and 

only  the  balance  retained  for  ordinary  banking  opera- 

• 

tions,  thus  effectively  putting  these  three  banks  in  line  with 
the  other  nine  in  this  matter.  Taking  account  of  the  origi- 
nal cash  subscription  of  these  banks,  the  total  cash  paid  in 
by  the  holders  of  the  25,000,000  dalers  of  shares  amounted 
to  a  little  over  9,000,000  dalers.  Under  a  subsequent 
revision  of  the  banking  law,  the  course  voluntarily  adopted 
by  these  three  banks  was  made  obligatory  on  all.  It  ap- 
pears, further,  that  there  was  in  some  other  cases  an  excess 
of  cash  subscriptions  over  the  minimum  proportion  re- 
quired, the  excess  being  invested  as  in  the  cases  specially 
considered  above.  During  the  years  1837-1847  there 
were  cases  in  which  the  directors  did  not  enforce  against 
subscribers  the  full  cash  subscription  specified  in  the 


The    Swedish    Banking    System 

articles  of  association,  but  this  state  of  affairs  was  not 
continued  in  later  years. 

The  deposit  of  securities,  under  the  control  of  a  public 
officer  and  of  the  bank  jointly,  suggests  to  the  mind  the 
national  bank  system  of  the  United  States,  with  its  pro- 
vision for  the  purchase  of  government  bonds  as  a  condition 
precedent  to  the  issue  of  bank  notes.  The  Swedish  banks 
were  accorded  a  much  greater  liberty  as  to  the  selection  of 
the  securities,  which,  however,  as  in  the  United  States, 
served  as  a  guaranty  for  bank  notes  issued.  It  is  to  be 
observed  that  the  system  of  representing  the  part  of  the 
capital  not  paid  up  in  cash  by  securities  was  embodied  in 
the  articles  of  association  of  various  banks  before  the  date 
of  the  decree  of  1846,  which  imposed  it  as  a  general  condi- 
tion on  all. 

The  charters  which  were  granted  to  enskilda  banks  had, 
in  general,  a  term  of  ten  years,  with  the  requirement  that 
application  for  renewal  must  be  made  at  least  eighteen 
months  before  the  current  term  expired.  The  first  three 
charters  were  due  to  expire  in  1840,  1843,  and  1845,  re- 
spectively. There  were  three  banks  chartered  in  1837, 
and,  before  the  first  term  of  the  earlier  banks  ran  out,  a 
renewal  was  granted  so  that  all  six  should  expire  together 
in  1847.  Thus,  after  the  determination  of  the  new  condi- 
tions of  operation  in  1846,  all  the  six  banks  then  existing 
were  at  once  brought  under  the  new  rules,  their  charters 
being  renewed  in  1846.  How  the  interest  in  the  develop- 


39 


National    Monetary     Commission 

ment  of  these  banks  was  spreading  is  shown  in  the  follow- 
ing comparison  of  the  situation  at  intervals  of  ten  years : 

Enskilda  banks,  1837-1857. 


1837- 

1847. 

1857- 

Number  of  banks  

6 

8 

I  2 

Number  of  shares 

22     299 

87    662 

Number  of  shareholders  a  

I  ,  025 

i,  826 

2     924 

Subscribed  capital  

Dalers 
currency. 
6.  342,  600 

Dalers 
currency. 
15  ,  736.  320 

Dalers 
currency. 
25  .  ooi  ,  900 

Paid-up  capital 

2,  036,  940 

4,  535    1  35 

6   689   475 

Surplus          ._      .   ._    

217,  418 

678.  794 

729,  441 

Notes  in  circulation 

4    085    8l2 

Cash  held  &    _ 

i  ,  872,  735 

7,  562,  748 

8   800   985 

Deposits  

24.  380 

203,  ooo 

3,  557,  930 

Current  account  balances 

215,  046 

1,451    640 

4    722   639 

Other  borrowings              .    

69,  604 

2,  448,  500 

Discounted  bills  c 

3i  533    496 

8   169  850 

16  348   719 

Advances  <*                               - 

682.  446 

4,  133    580 

ir,  105  ,  01  i 

Loans  on  stock  exchange  collateral  

I  2,  OOO 

i  .  351,  457 

i  ,  271,  785 

Balance  sheet  total 

9,  790,  64  1 

31    02  i  ,  798 

55.  645    205 

NOTE. — The  daler  currency  is  equivalent  to  26.8  cents. 

0 Shareholders  in  more  than  one  bank  are  included  once  for  each  such  bank. 

6  Including  gold,  silver,  Riksbank  notes,  notes  of  other  enskilda  banks,  and  deposits 
at  the  Riksbank. 

cln  this  item  are  included  all  advances  on  notes  of  hand,  whether  secured  by  the 
deposit  of  collateral  pledged  to  the  bank  or  by  personal  guaranties.  In  1857  a  further 
item  of  discounted  inland  bills  of  exchange,  amounting  to  1,249,593  dalers  currency, 
should  be  added. 

d  Cash  credits,  secured  by  deposit  of  collateral  or  otherwise.  The  figures  show  the 
outstanding  advances.  The  total  of  credits  assigned  to  customers  at  the  end  of  1857 
was  16,249,000  dalers. 

The  number  of  banks  doubled,  the  shareholders  nearly 
trebled,  in  the  twenty  years'  interval  covered  by  the  table. 
The  subscribed  capital  increased  threefold,  the  paid-up 
capital  in  the  proportion  of  3  to  10,  while  the  proportion 
of  paid-up  capital  to  total  assets  diminished  from  21  per 
cent  in  1837  to  15  per  cent  in  1847  and  12  per  cent  in  1857. 
By  far  the  most  important  means  of  providing  the  funds 
for  the  activities  of  the  banks  was  the  issue  of  notes, 


40 


The     Swedish     Banking     System 

which,  providing  double  the  paid-up  capital  in  1837, 
accounted  for  three  times  the  paid-up  capital  in  1857, 
having  been  even  more  important  relatively  in  1847. 

The  principal  items  on  the  assets  side  of  the  account 
are  the  discounts  and  cash  credits,  of  which  the  latter  had 
increased  most  rapidly  and  formed  the  subject  of  no 
little  criticism.  The  feature  has  been  so  familiar  through 
its  services  in  the  Scotch  banking  system  that  no  com- 
ment on  it  is  required  here.  A  small  commission  on  the 
amount  of  the  credit  granted  and  interest  on  the  amount 
actually  withdrawn  on  the  credit  provided  the  bank's 
profit.  The  utility  of  these  facilities  in  encouraging 
enterprise  has  often  been  emphasized  by  writers  on  bank- 
ing subjects.  Of  the  discounts,  it  appears  that  a  large 
proportion  was  on  personal  security,  and  the  extent  of 
these  loans  was  used  as  an  argument  against  leaving  too 
much  freedom  and  granting  too  great  privileges  to 
enskilda  banks.  The  difficulty  in  recovering  such  loans 
might  endanger  the  redemption  of  the  notes,  in  which 
they  were  largely  made. 

The  holdings  of  cash  items  increased  faster  than  the 
paid-up  capital,  but,  in  the  second  decennium  repre- 
sented, less  rapidly  than  the  outstanding  notes.  If  the 
aggregate  of  notes,  current-account  balances,  and  credit 
balances  not  drawn  be  considered,  their  total  at  the  end 
of  1857  was  31,250,000  dalers,  as  compared  with  which 
the  cash  items  represented  28  per  cent,  a  not  unsatisfac- 
tory showing  when  the  probabilities  of  a  drain  arising 
from  any  of  these  classes  of  claims  on  the  banks  is  con- 
sidered. 


CHAPTER  III. 


THE  RIKSBANK  AND  ITS  SUBORDINATE  INSTITUTIONS, 

1834-1875. 

Before  proceeding  further  with  the  development  of 
legislation  touching  the  enskilda  banks,  it  is  necessary  to 
review  events  relating  to  the  Riksbank  in  the  period 
following  the  resumption  of  cash  payments  in  1834, 
inasmuch  as  the  supporters  of  exclusive  privileges  for  the 
state  institution  were  able,  in  this  period,  to  reassert 
their  strength. 

The  association  of  private  capital  with  the  national 
undertaking  had  formed  the  subject  of  repeated  and 
careful  discussion.  One  view  held  was  that  the  Swedish 
constitution,  in  its  provisions  dealing  with  the  relations 
of  the  bank  to  the  Parliament,  rendered  the  inclusion  of 
private  shareholders  impossible,  and  this  view  finally 
prevailed,  though  some  specious  arguments  on  the  other 
side  were  advanced.  The  authorization  of  the  establish- 
ment of  the  enskilda  banks  was  one  outcome  of  a  particular 
phase  of  the  controversy,  but  the  achievement  of  this  step 
rather  stimulated  than  composed  the  discussion  on  prin- 
ciples. In  the  foregoing  the  transformation  of  discount 
establishments  intended  to  operate  with  private  funds, 
with  support  from  the  Riksbank,  into  a  lending  agency 
of  the  bank  itself  from  the  year  1816  has  been  briefly 
related,  and  the  establishment  of  branch  lending  estab- 
lishments at  Gothenburg  and  Malmo  in  1824  has  also 
been  noted. 

42 


The     Swedish     Banking     System 

These  remained  as  the  only  branches  of  the  Riksbank 
till  the  year  1851.  In  the  Parliament  of  1850-51  a  de- 
cision of  great  importance  in  reference  to  the  bank's 
development  was  taken.  In  addition  to  a  third  ordinary 
branch  of  the  bank  to  be  established  at  Wisby,  a  new 
system  of  district a  banks  was  authorized.  These  banks 
were  to  be  established  with  private  capital,  but  were  to 
differ  from  the  existing  enskilda  banks  in  not  having 
note-issuing  rights.  To  give  them  the  strength  without 
which  one  of  the  main  objects  of  their  promoters,  namely, 
that  effective  competition  with  the  existing  enskilda  banks 
which  might  hinder  the  further  multiplication  of  the  latter 
if  it  did  not  provide  a  substitute  for  those  already  estab- 
lished, could  not  be  attained,  the  Riksbank  was  to  be  a 
kind  of  foster  mother  to  the  new  class  of  banks,  granting 
advances  and  giving  credits  at  low  rates. 

Between  1852  and  1862,  both  inclusive,  25  charters  for 
such  district  banks  were  granted,  and  22  of  them  started 
operations.  The  profit  made  by  the  Riksbank  on  its 
connections  with  these  quasi  branches  was,  however,  not 
satisfactory,  and  the  Parliament  of  1862-63  resolved  to 
withdraw  the  support  of  the  Riksbank,  a  step  which  in- 
evitably led  to  the  gradual  extinction  of  the  district  banks. 

Five  charters  were  granted  in  1852  for  ten  years,  of 
which  one  was  forfeited  through  the  lapse  of  the  interval 
permitted  for  the  commencement  of  operations  before 
business  was  started.  Three  charters  were  granted  in  1855 
and  twelve  in  1858,  two  of  the  latter  not  resulting  in  the 
actual  starting  of  business.  One  was  granted  in  each  of  the 

a  Called  "  Filialbanker,"  or  "  Branch  banks."  The  use  of  the  literal  ren- 
dering of  their  titular  designation  would  be  misleading. 

43 


National    M  on  et  ar  y     Commission 

years  1859  and  1860  and  three  in  1862.  Of  the  banks 
thus  established,  none  endured  for  more  than  twenty 
years,  and  the  last  to  disappear  ceased  its  operations  on 
June  30,  1*875 .  Half  of  the  total  number  were  absorbed 
by,  merged  in,  or  converted  into,  enskilda  banks.  Two 
others — the  two  first  chartered — were  reconstructed  as 
joint-stock  banks  with  limited  liability  in  1872  and  1873. 

The  regulations  contained  in  the  royal  decree  of  Sep- 
tember 30,  1851,  under  which  the  district  banks  were 
established,  are  deserving  of  attention  as  comprising  some 
features  which  were  added  to  the  law  regulating  enskilda 
banks  at  its  revision  in  1864. 

The  head  offices  were,  as  with  the  enskilda  banks, 
required  to  be  situated  within  a  town.  At  least  30 
shareholders  were  required,  who  accepted  a  joint  and 
several  liability  for  the  bank's  undertakings.  At  least 
one-fourth  of  the  subscribed  capital  was  to  be  paid  in  cash.0 
For  the  remaining  three-fourths  a  note,  payable  on  six 
months'  notice,  was  to  be  given  to  the  directors,  accom- 
panied by  collateral  in  the  shape  of  coin  or  bullion  (duly 
assayed)  of  gold  or 'silver,  public  securities  taken  at  the 
value  at  which  they  were  accepted  by  the  Riksbank  as 
security  for  loans,  or  mortgages  on  real  estate,  in  the  rural 
districts  within  the  amount  of  the  valuation  for  taxation 
made  in  1850,  in  towns  within  two-thirds  of  the  fire-insur- 
ance valuation,  the  security  to  be  subject  to  the  approval 
of  the  directors  and  of  an  inspector  appointed  by  the 
managers  of  the  Riksbank. 

« In  two  cases  the  articles  of  association  required  that  the  whole  be  so 
paid  up  within  two  years. 


44 


The     Swedish     Banking     System 

The  charter  was  to  be  granted  for  a  period  not  exceeding 
ten  years.  Subject  to  the  fulfillment  of  these  conditions, 
the  district  bank  should  be  entitled  to  advances  from  the 
Riksbank  to  an  amount  not  exceeding  the  uncalled  part  of 
the  subscribed  capital,  for  which  collateral  security  had 
been  provided  by  the  subscribers,  or  500,000  bank  dalers, 
whichever  were  the  lower  amount. 

A  lien  on.  the  collateral  security  just  mentioned  was  to 
be  given  as  security  to  the  Riksbank. 

Four-fifths  of  the  advances  were  to  be  made  in  the  shape 
of  loans,  the  remainder  as  an  open  credit  on  which  the 
district  bank  might  draw,  using  for  these  drafts  printed 
forms  supplied  by  the  Riksbank,  and  notifying  the  cen- 
tral institution  by  the  first  outgoing  post.  These  drafts 
were  to  be  of  the  same  denominations  as  were  permitted 
to  the  branch  loan  offices  of  the  Riksbank,  viz,  100,  150, 
500,  and  1,000  bank  dalers,  i.  e.,  150,  225,  750,  and  1,000 
dalers  currency,  and  none  other. 

If  any  of  the  district  banks  desired  to  obtain  advances 
only  to  the  extent  of  a  quarter  of  its  subscribed  capital,  it 
might  obtain  the  whole  in  the  form  of  an  open  credit, 
up  to  the  amount  of  200,000  dalers  currency. 

The  rate  of  interest  on  the  loans  and  on 'the  drafts  on 
the  open  credit  was  fixed  at  3  per  cent. 

The  business  to  be  carried  on  by  the  district  banks  was 
to  comprise  the  making  of  advances,  the  discount  of  bills 
of  exchange,  and  the  opening  of  current  accounts  and  grant 
of  cash  credits  under  conditions  to  be  determined  in  detail 
by  regulations  under  the  authority  of  the  Crown. 

In  the  yearly  audit  a  representative  of  the  Riksbank 
was  to  take  part. 

45 


National    Monetary     Commission 

By  a  later  modification  of  the  regulations  the  one-fifth 
proportion  of  the  open  credit  to  total  advances  from  the 
Riksbank  was  increased  to  one-third.  In  1858  it  was 
further  decided  to  charge  a  commission  of  at  least  i  per 
cent  per  annum  on  the  amount  of  the  credits  opened. 

The  advances  made  might  be  recalled,  apart  from  acts  6f 
the  directors  of  the  bank  receiving  them,  should  it  seem 
necessary  to  increase  the  Riksbank's  cash  reserve,  and 
other  means  of  doing  so,  such  as  the  restriction  of  the  dis- 
counting business  of  the  agencies  of  the  Riksbank  and 
of  its  advances  on  open  credits  in  general,  have  proved 
inadequate. 

In  case  of  notice  being  given  of  the  cessation  of  loans  to 
a  district  bank  under  such  conditions,  that  bank  was 
required  to  repay  the  amount  by  equal  installments  of 
one-fifth  yearly,  beginning  one  year  after  the  date  of  the 
notice. 

The  detailed  regulations  for  different  district  banks  dif- 
fered in  a  number  of  points  from  one  another.  Thus  in 
some  cases  it  was  forbidden  to  issue  share  certificates,  but 
the  subscribers  received  the  right  to  an  open  credit  without 
the  deposit  of  special  collateral,  in  some  cases  to  as  much 
as  two-thirds  of  the  subscribed  capital.  In  some  cases  the 
collateral  accepted  against  an  open  credit  was  real  estate. 
In  the  older  banks  the  regulations  fixed  the  limit  of  ad- 
vances against  personal  guaranties  at  one-fifth  of  the 
subscribed  capital,  together  with  the  average  amount  of 
the  payments  into  customers'  drawing  accounts  over  a 
lengthened  period.  Later  regulations  limited  this  class 
of  advances  to  a  fifth  of  the  subscribed  capital. 


46 


The     Swedish     Banking     System 

The  Parliament  of  1860  determined  that  the  entire 
amount  of  the  advances  from  the  Riksbank  to  district 
banks  should  thenceforth  be  in  the  form  of  open  credits 
alone,  limited  to  one-half  the  subscribed  capital  of  the 
bank  to  which  the  accommodation  was  granted,  but  not 
exceeding  in  any  individual  case  500,000  currency  dalers 
and  subject  to  an  interest  charge  of  4  per  cent,  with  a 
minimum  commission  of  2  per  cent  per  annum  on  the 
amount  of  the  credit  opened. 

The  requirement  from  the  enskilda  banks  by  the  law  of 
1846  of  a  quarterly  account  was  not  included  in  the  dis- 
trict banks'  regulations,  so  that  the  statistics  relating  to 
them  have  been  compiled  from  their  annual  audit  accounts, 
and  the  figures  do  not  apply  to  the  same  date  for  all  the 
banks. 

The  drafts  on  the  Riksbank  were  found  to  remain  in 
circulation  for  a  considerable  period,  and,  as  the  general 
rate  of  interest  charged  by  the  district  banks  on  the  ad- 
vances made  by  them  was  5  per  cent  (raised  by  a  number 
of  them  to  6  per  cent  during  the  financial  pressure  in 
1857  or  1858)  they  afforded  a  source  of  no  inconsiderable 
profit,  a  larger  share  in  which  was  sought,  in  the  raising 
of  the  rate  charged,  by  the  Riksbank  itself. 

The  provision  of  the  funds  for  the  loans  made  by  the 
district  banks,  from  which  they  could  not  be  withdrawn 
quickly  in  case  of  need,  tied  up  the  resources  of  the  central 
institution.  As  appears  from  the  statement  below,  the 
district  banks  provided  by  the  development  of  the  deposit 
side  of  their  business  only  a  moderate  proportion  of  the 
funds  which  they  lent,  and  the  advances  obtained  from 


47 


National    Monetary     C  o  mm  i  s  s  i  o 


n 


the  Riksbank  formed  the  most  important  part  of  their 
available  resources. 

The  following  table  gives  some  of  the  figures  for  the 
year  1855,  selected  rather  than  1857  because  of  the  finan- 
cially disturbed  state  of  the  last-named  year,  and  1867, 
when  as  yet  the  greater  part  of  this  group  of  banks  were 
still  in  operation: 

District  banks  1855  and  1867. 


Accounts  of  — 

June  30  and  De- 
cember 31,  1855. 

June  30,  1  867. 

Number  of  banks 

4 

18 

Subscribed  capital  .    

Dalers  currency. 
3,  150.  ooo 
795.  575 
39.841 
ioi,  198 
558,  620 
198,083 
1-099.937 
i,  796,  850 
2,  482,  661 
1.091.  553 
192,  617 
2,354,425 
6,  850,  468 

Dalers  currency. 
13.  443.  ooo 
5,  291,429 
336,  112 
263,566 
578,757 
4.845.695 
i,  208,  417 
7.  222,469 
9.038,  181 
4.  565.  739 
5,  137,  741 
8,  I5I.57I 
2*9,  486,  135 

Paid-up  capital 

Reserve  funds  __ 

Profit  of  year  

Cash  in  hand  (coin  and  notes) 

Deposits  

Current  account  balances  

Advances  from  Riksbank 

Loans  _        _____ 

Advances  on  open  credits  

Bills  of  exchange 

Security  guaranty  for  uncalled  capital  _ 

Balance  sheet  total 

In  1863  the  number  of  the  district  banks  reached  the 
maximum  of  22,  and  remained  at  that  figure  but  little  over 
a  year.  The  subscribed  capital  at  that  time  exceeded 
15,000,000  dalers  currency. 

It  will  be  seen  that  the  cash  with  which  the  business 
was  conducted  was  small,  the  open  credit  at  the  Riksbank 
serving  in  place  of  cash  in  hand.  The  dealings  in  inland 


48 


The     Swedish     Banking     System 

bills  of  exchange  had  increased  very  notably  in  the  in- 
terval between  the  selected  dates,  as  had  also  the  deposits 
at  time  .and  notice.  The  capital  paid  up  had  increased 
faster  than  the  business  done,  and  the  proportion  of  the 
funds  used  in  lending,  which  was  provided  by  the  Riks- 
bank,  had  decreased  from  48  per  cent  to  39  per  cent. 

The  resolution  of  the  Parliament  which  effectively 
brought  the  system  to  an  end  was  that  no  increase  was  to 
be  made  in  the  sums  advanced  to  any  of  the  district  banks, 
and  that  such  banks,  if  chartered  in  or  after  1858,  were 
not  to  be  entitled  to  any  advances  from  the  Riksbank. 
It  appeared  that,  on  the  ten  millions  (dalers  currency)  to 
which  the  advances  made  to  district  banks  had  increased, 
the  Riksbank  made  only  2.39  per  cent  net,  a  rate  regarded 
as  quite  inadequate. 


22150—10 4  49 


CHAPTER  IV. 


THE  ENSKILDA  BANKS  AFTER  1850. 

The  district  banks  had  been  established  in  part  in  ac- 
cord with  the  view  that  the  continued  existence  of  private 
note-issuing  banks  was  undesirable.  It  was  alleged  that 
the  increase  and  decrease  of  their  note  issues,  instead  of 
corresponding  to  the  expanding  and  contracting  demand 
for  the  circulating  medium,  was  really  affected  by  consid- 
erations leading  to  an  inverse  correspondence,  that  is, 
that  the  issues  contracted  when  the  demand  for  circula- 
tion was  great,  and  expanded  in  the  opposite  case.  Propo- 
sitions were  discussed  having  in  view  the  limitation  of  the 
maximum  issue  to  a  specified  amount,  each  bank  being 
allotted  a  share  in  this  amount,  but  none  of  these  plans 
received  legal  sanction. 

The  note  circulation  of  the  enskilda  banks  had  been 
growing  rapidly,  while  that  of  the  Riksbank  had  been 
practically  stationary.  The  figures  for  the  end  of  each 
year  show  that  in  1840  the  enskilda  bank  notes  had 
already  exceeded  10,000,000  dalers  currency,  while  at  that 
time  the  notes  of  the  state  institution  were  in  circulation 
to  a  value  of  a  little  over  41,000,000  dalers  currency. 
Until  1853,  the  amount  of  the  latter  did  not,  either  in  June 
or  December,  reach  40,000,000  again,  except  in  the  crisis 
year  1847.  In  1844  it  was  below  30,000,000  dalers.  Mean- 
while the  enskilda  bank  issues,  after  remaining  without 


The     Swedish     Banking     System 

expansion  till  1845  (in  1843  they  were,  in  fact,  slightly 
under  9,500,000)  rose  to  over  15,000,000  dalers  in  each 
of  the  years  1847-1852  and  then  increased  rapidly  to 
20,500,000,  25,400,000,  and  31,600,000  dalers  in  the  three 
following  years.  In  these  last  three  years  there  was  a 
parallel  increase  in  the  note  circulation  of  the  Riksbank, 
which  increased  by  7,500,000,  8,500,000,  and  8,500,000 
dalers  in  the  three  years,  respectively,  to  about 
58,500,000  dalers  in  1855.  The  development  of  the 
circulation  of  the  state  institution  through  the  medium 
of  the  district  banks  may  account,  in  part,  for  these 
increases.  But  it  is  clear  that,  up  to  this  point,  a  gen- 
eral expansion,  in  which  both  enskilda  banks  and  the 
Riksbank  shared,  was  in  progress.  At  the  end  of  1855 
the  aggregate  note  circulation  was  90,000,000  dalers 
currency,  as  compared  with  50,000,000  dalers  in  1840. 

At  the  same  time  that,  in  1855,  somewhat  more  stringent 
conditions  were  imposed  on  the  district  banks,  the  enskilda 
banks  were  also  subjected  to  further  regulations  by  the 
decree  of  November  10,  1855.  The  main  features  of  the 
new  legislation  were: 

1.  That  the  number  of  shareholders  must  not  be  less 
than  30. 

2.  All  banks  to  issue  notes  of  the  same  denominations 
and  of  uniform  size  for  a  given  denomination,  the  lowest 
value  permitted  being  5  dalers  currency. 

3.  The  banks  were  forbidden  to  buy  and  sell  other  things 
than  gold  and  silver,  inland  and  foreign  bills  of  exchange, 
and  interest-bearing  paper,   or  to   own   real   estate  not 
required  for  the  bank's  own  accommodation. 


National    M on  et ar y     Commission 

4.  From  loans  for  a  period  not  exceeding  six  months, 
interest  at  a  rate  not  exceeding  5  per  cent  might  be  de- 
ducted for  the  entire  currency  of  the  loan  (hitherto  the 
discount  form  of  lending  on  a  note  had  been  permitted  in 
loans  up  to  a  full  year) ,  and  for  any  period  during  which 
the  loan  was  not  repaid  after  the, due  date,  6  per  cent 
might  be  charged — legal  proceedings  for  recovery  not  to 
be  delayed  beyond  one  month  from  the  due  date. 

The  threatened  abolition  of  the  5  daler  note  had  been 
postponed  from  the  end  of  1850,  first  for  one  year,  and  later 
for  a  further  three  years.  The  right  to  the  continued  issue 
of  these  small  notes  was  now  definitely  granted  by  the 
decree  whose  new  provisions  are  here  summarized. 

In  the  years  1856  and  1857  the  charters  of  all  the  eight 
then  existing  enskilda  banks  were  renewed,  and  four  addi- 
tional charters  were  granted,  one  in  1856,  three  in  1857. 
The  varying  designations  of  these  banks  which  had  been 
employed  during  the  preceding  period  were  now  unified, 
and  all  were  called  by  the  one  official  name  "enskilda" 
banks.  The  opening  of  the  Stockholm  Enskilda  Bank 
in  1856  is  recognized  as  marking  a  new  era  in  the  history 
of  this  class  of  bank.  Its  founders  had  recognized  that  the 
system  of  district  banks  was  not  destined  to  endure  for 
very  long  when  the  new  stipulations  of  1855  were  imposed 
on  them.  They  had  themselves  applied  in  1852  for  a  dis- 
trict bank  charter  unsuccessfully.  The  subscription  list 
needed  to  remain  open  only  two  days  in  February,  1856, 
and,  the  charter  having  been  granted  on  July  i,  to  date 
from  September  i,  business  was  begun  on  October  15. 
As  already  related,  the  capital  was  entirely  paid  in  in  cash, 
and  60  per  cent  invested  in  interest-bearing  securities  by 


The     Swedish     Banking     System 

the  directors,  bringing  the  bank  into  a  position  similar  to 
that  occupied  by  other  banks  the  subscribers  to  whose 
shares  deposited  securities  for  a  part  of  the  face  value. 

The  articles  of  association  of  the  Stockholm  bank  have 
served  as  a  model  for  imitation  by  those  which  were  estab- 
lished later.  The  rules  defining  its  operations  included  the 
following : 

"The  bank  shall  buy  and  sell  bills  of  exchange  and  in- 
terest-bearing securities,  and  lend  on  merchandise,  shares, 
or  other  collateral  which  may  be  judged  by  the  directors 
to  give  full  security  to  the  bank.  Only  in  the  last  resort 
shall  loans  be  granted  on  personal  guaranty,  in  the  dis- 
cretion of  the  directors,  and  never  to  a  higher  total  amount 
than  the  tenth  part  of  the  subscribed  capital  *  *  * 
No  loans  shall  be  granted  for  a  longer  period  than  six 
months.  " 

The  purpose  of  the  bank's  founders  was  to  facilitate 
the  circulation  of  money  in  the  most  general  sense  of  those 
words.  Hitherto  none  of  the  banks  had  developed  the 
deposit  business.  When  funds  were  needed,  means  were 
taken  to  secure  them  partly  in  the  shape  of  special  loans 
which  the  bank  did  not  seek  to  retain  as  deposits  when  the 
immediate  need  had  passed,  but  the  general  practice  of 
deposit  banking  was,  to  all  intents  arid  purposes,  intro- 
duced by  the  Stockholm  bank.  Similarly  with  current 
accounts,  for  which  the  banks  had  offered  small  induce- 
ments. Printed  forms  for  bills  of  exchange,  receipts,  etc., 
were  not  provided,  and,  in  view  of  the  lack  of  so  many  of 
the  ordinary  facilities  of  modern  banks,  it  can  be  readily 
understood  what  a  field  of  enterprise  lay  open  for  exploita- 
tion to  the  new  bank  and  its  imitators.  The  public  had 

53 


National    Monetary     Commission 

to  be  taught  to  use  the  banks,  and  to  come  to  regard  them 
as  necessary  intermediaries  in  all  business  affairs.  Hither- 
to the  loans  of  the  enskilda  banks  had  been  mainly  granted 
on  securities  not  readily  realizable  or  promptly  liquidated, 
while  the  funds  of  the  new  bank  were  employed  in  the 
most  regularly  liquidated  forms  of  short  term  loans,  aid- 
ing commerce  while  giving  a  greater  security  to  the  lend- 
ing institution. 

The  issue  of  notes  was  not  regarded  as  a  source  of 
important  profits,  which  were  sought  through  the  devel- 
opment of  the  deposit  business,  for  which  the  metropolis 
offered  so  fruitful  a  field.  Most  of  the  deposits  are  made 
for  long  periods,  so  as  to  secure  the  highest  rate  of  interest 
from  the  bank,  and  thus  the  bank  has  a  security  in  using 
its  deposit  fund  which  does  not  accrue  to  deposits  largely 
repayable  on  demand.  Already  by  the  end  of  1858  the 
deposits  reached  nearly  6,000,000  dalers  ($1,600,000)  and 
the  current-account  balances  over  3,500,000  dalers. 
Outstanding  loans  amounted  to  over  7,000,000  dalers,  the 
balance  after  repayment  of  three-fifths  of  the  loans  made 
in  the  course  of  the  year.  All  this  was  achieved  while  the 
capital  was  1,000,000  dalers,  of  which  only  400,000  dalers 
in  cash  had  been  retained  for  working  capital,  and  the 
note  issue  was  barely  1,150,000  dalers.  The  net  profit  of 
the  year  was  228,660  dalers,  from  which  the  shareholders 
received  a  5  per  cent  dividend,  the  balance  being  trans- 
ferred to  reserve.  Within  twenty  years  the  dividends 
increased  to  20  per  cent,  and  the  reserve  fund  grew  so 
large  that,  on  the  renewal  of  the  charter  in  1875,  the  new 
capital  was  doubled  by  the  issue  to  shareholders  of  two 
shares  of  1,000  dalers  for  each  one  previously  held  of  the 

54 


The     Swedish     Banking     System 

same  face  value.  Besides  the  head  office,  branches  were 
opened  in  various  parts  of  Stockholm. 

The  example  set  by  this  bank  served  to  stimulate  devel- 
opment on  the  part  of  its  fellows,  as  well  as  securing 
imitation  from  the  later-founded  banks.  As  a  bank  of 
deposit  it  retains  a  leading  position,  and  apart  from  the 
Riksbank,  but  three  other  banks  have  a  larger  balance- 
sheet  total  to-day,  or  can  show  larger  deposits  than 
the  Stockholm  Enskilda  Bank. 

An  important  new  departure  initiated  by  this  bank  in 
1858  was  the  "bank-post  bill"  (postremissvexel) ,  which 
was  speedily  copied  by  other  banks  and  has  secured  for 
itself  a  very  large  place  in  the  banking  transactions  of 
Sweden.  It  is  a  draft  by  one  bank  or  branch  of  a  bank 
on  another,  and,  when  it  had  once  secured  general  accept- 
ance, became  an  important  supplemental  means  of  circu- 
lation alongside  of  the  bank  note.  Unlike  the  bank-post 
bills  in  use  in  other  countries,  those  of  Sweden  are  payable 
on  demand  and  not  subject  to  any  deduction  by  way  of 
discount.  The  form  of  the  bill  was  generally  that  of  a 
draft,  sometimes  that  of  a  promissory  note.  Sometimes 
the  bill  bears  on  its  face  the  statement  that  it  will  be 
cashed  at  all  the  branches  of  the  issuing  bank,  some- 
times that  it  may  be  cashed  at  most  of  the  banks 
throughout  the  country,  the  latter  having  come  to  be  the 
fact,  even  though  no  definite  contract  to  that  effect 
should  have  been  made  between  the  issuing  bank  and 
certain  of  the  others.  All  the  enskilda  banks  without 
branches  in  Stockholm  have  in  that  city  an  agent  for 
effecting  payment  of  post  bills  (and  formerly  of  notes 
also).  These  bills  serve  for  remittances  between  banks 

55 


National    M o  n  et  ar y     Commission 

in  settlement  of  balances,  and  have  secured  a  sufficient 
reputation  to  be  accepted  in  neighboring  countries  with 
much  readiness. 

Printed  or  engraved  forms  are  in  use  for  these  bills,  the 
drawer's  name  being  printed,  and  they  are  drawn  for 
uneven  amounts,  always  to  order,  and  transferable  by 
indorsement.  They  are  generally  drawn  on  a  bank  in 
Stockholm.  Their  period  of  circulation  is  short,  so  that 
the  outstanding  mass  is  much  smaller  compared  with  the 
new  issues  made  in  a  year  than  is  the  case  with  bank  notes. 

In  many  respects  they  resemble  the  bank  money  orders 
of  the  members  of  the  Bankers'  Association  or  express 
money  orders,  though  the  practice  of  charging  a  commis- 
sion on  them,  never  general,  has  ceased  long  since.0  The 
issuer  secures  his  profit  through  the  interval  between  issue 
and  presentation,  and  even  when  the  charge  for  the  credit 
with  the  drawee  bank  is  considered,  the  issue  of  post  bills 
in  making  a  loan  insures  a  higher  rate  of  interest  received 
than  that  paid.  Though  the  check  system  is  known  and 
practiced  in  Sweden,  the  bank  post  bill  provides  an 
almost  invaluable  facility  to  the  business  community. 
Even  accepted  checks  do  not  present,  in  the  United 
States,  the  combined  security  and  convenience  of  the 
Swedish  bank  post  bill,  which  has  practically  the  security 
of  an  accepted  check,  and  is  free  from  charges  for  collec- 
tion. The  development  of  the  deposit  system  by  the 
banks  was  a  source  of  considerable  jealousy  and  discon- 
tent on  the  part  of  private  individuals  who  had  previously 


°This  is  true  of  the  bills  issued  at  the  Stockholm  offices  of  the  banks, 
and  at  any  rate  of  those  below  a  certain  value  issued  at  other  places. 


The     Swedish     Banking     System 

secured  loans  directly  from  other  private  individuals, 
and  now  found  the  banks  attracting,  by  higher  rates, 
greater  security,  and  less  trouble,  the  funds  hitherto  avail- 
able for  private  loans.  The  growth  of  the  deposit  busi- 
ness was,  in  fact,  in  part  a  transfer  to  banks  of  business 
previously  conducted  without  their  intermediation,  not 
wholly  the  creation  of  a  new  business  in  borrowing  and 
lending.  Borrowers  found  themselves  compelled  to 
accept  from  the  banks  harder  terms  and  shorter  loans 
than  they  had  before  secured  direct. 

So  far  as  the  business  in  inland  bills  of  exchange  is  con- 
cerned, attempts  in  1835  and  1851  to  encourage  enter- 
prise by  bringing  the  law  regarding  such  bills  more  into 
correspondence  with  the  needs  of  trade  were  not  wholly 
successful,  though  the  provisions  of  the  latter  law  per- 
mitted the  development  of  the  bank  post  bill.  It  was 
not  till  borrowers  had  learned  to  meet  their  bills  promptly, 
and  to  be  content  with  shorter  terms  of  borrowing,  and 
the  banks  had  instituted  discrimination  against  mere 
accommodation  bills  in  favor  of  those  representing  actual 
business  transactions,  that  the  inland  bill  business  could 
flourish.  These  defects  are  not  wholly  uprooted  in 
Sweden  or  elsewhere,  but  their  partial  removal  was  neces- 
sary before  banks  could  handle  inland  bills  reasonably 
freely.  A  law  of  1869  replaced  an  older  commercial 
custom  by  the  legalization  of  ordinary  acceptance  on  a 
bill,  and  contributed  much  to  increase  their  use,  to  the 
mutual  advantage  of  merchants  and  manufacturers  on 
the  one  hand  and  their  customers  on  the  other. 

Before  the  expiration  of  the  enskilda  bank  charters, 


57 


National    M  on  e  t  ar  y     Commission 

renewed  for  ten  years  in  1856,  the  definite  decision  which 
brought  the  district  banks  to  an  end  had  been  taken,  as 
already  related,  and  the  law  applicable  to  enskilda  banks 
also  underwent  revision.  Among  the  influences  tending 
to  secure  a  prolongation  of  all  essential  privileges  to  the 
enskilda  banks  may  be  counted  a  mistrust,  even  among 
some  who  were  not  very  friendly  to  the  enskilda  banks, 
of  monopolistic  power  in  the  hands  of  the  bank  which 
was  controlled  by  the  legislative  body.  The  security  of 
the  public  required  some  further  restrictions  on  the  insti- 
tutions which  provided  an  important  part  of  the  currency, 
but,  when  that  was  adequately  provided  for,  the,  greatest 
possible  freedom  appeared  desirable  for  the  banking 
institutions. 

The  proposals  of  the  Parliament  were  only  partially 
adopted  in  the  royal  decree  of  May  20,  1864,  which, 
repealing  the  earlier  statutes  of  1824,  1846,  and  1855, 
instead  of  supplementing  them,  as  on  previous  occasions, 
substituted  an  entire  new  body  of  ordinances  respecting 
note-issuing  private  banks.  It  will  be  sufficient  here  to 
note  the  leading  new  features  of  the  legislation  of  1864. 

1.  The  ordinary  shareholders  must  be  Swedish  citizens. 

2.  With  the  ordinary  shareholders  might  be  associated 
others  who,  unlike  the  first,  might  enjoy  the  limitation  of 
their   liability  to   the   capital   subscribed.     These  share- 
holders   en   commandite   might   subscribe    a    capital  not 
exceeding  the  half  of    that  subscribed    by  the  ordinary 
shareholders.     They  possessed  voting  rights  in  the  general 
meetings  of  the  company  only  in  respect  of  the  election  of 
auditors,  and  were  eligible  for  election  as  such. 


The     Swedish     Banking     System 

3.  While  the  transfer  of  ordinary  shares  needed  to  be 
assented  to  at  a  general  meeting  of  the  company,  limited 
shareholders  might  transfer  their  holdings  on  notifying  the 
management  and  in  accordance  with  standing  rules  on  the 
subject . 

Retirement  of  ordinary  shareholders,  or  the  entry  of 
new  ones,  must  be  advertised  in  the  Official  Gazette  and 
recorded  in  the  register  of  the  county  court  of  the  district. 

A  register  of  shareholders  and  their  holdings  was  re- 
quired to  be  kept  at  the  bank  and  to  be  open  to  inspec- 
tion by  all. 

4.  Within  a  year  of   starting  business  the  entire  sub- 
scribed ordinary  capital,  and  that  en  commandite  within  a 
year  of  closing  the  subscription,  was  required  to  be  paid 
in  in  cash  (legal  tender),  the  charter  being  forfeited  for 
failure  to  fulfill  this  stipulation.     From  60  to  75  per  cent 
of  the  ordinary  capital,  as  might  be  determined  by  the 
company,  was  to  be  invested  in  securities  to  be  placed  in  a 
publicly  controlled  depository;  the  securities  to  consist, 
to  at  least  one-third  in  value,  of  readily  realizable  interest- 
bearing  bonds  and,  for  the  remainder,  of  mortgages  on 
real  estate  not  exceeding  one-half  the  valuation,  in  rural 
districts  the  last  tax  valuation,  in  towns  the  fire-insurance1 
valuation,  in  the  latter  case  the  property  being  required 
to   be   insured   in   an   officially   recognized   fire-insurance 
company.     The  validity  of  the  securities  was  to  be  ap- 
proved both  by  the  company  and  by  the  Crown's  local 
representative,   or  an  agent  acting  on  his  behalf.     The 
substitution  for  any  part  of  the  deposited  security  of  new 
collateral  to  be  similarly  approved. 


59 


National    M  o  n  e  t  ar  y     Commission 

The  safes  in  which  the  securities  were  deposited  were 
required  to  be  provided  with  separate  locks,  to  which 
the  bank's  management  and  the  Crown's  representative 
should,  respectively,  possess  keys. 

5.  A  shareholder  elected  as  director  was  required   to 
deposit  with  the  bank  at  least  one  share  certificate,  there 
to  remain  so  long  as  he  should  continue  a  director. 

Withdrawal  from  the  functions  of  director  to  be  subject 
to  the  assent  of  a  general  meeting,  and  a  director  so  retir- 
ing to  remain  responsible  for  the  business  arrangements 
in  which  he  had  shared  until  the  next  regular  audit  and 
subsequent  approval  of  the  accounts  by  a  general  meeting. 

6.  The  names  of  the  directors  and  of  those  entitled  to 
sign  bank  notes,  etc.,  on  behalf  of  the  company  to  be  noti- 
fied to  the  local  representative  of  the  Crown  and  adver- 
tised in  the  Official  Gazette. 

7.  The  names  of  ordinary  shareholders,  having  unlim- 
ited liability,  were  not  merely  to  be  duly  registered  in  the 
county  court  in  the  case  of  a  newly  formed  bank,  but  also 
advertised  in  the  Official  Gazette. 

8.  Before  the  issue  of  notes  could  commence  the  deposit 
of  securities,  as  mentioned  in  paragraph  4  above,  to  at 
least  25    per  cent  of  the  ordinary  capital,  was  required  to 
be  duly  attested,  and  the  blank  forms  of  the  notes  sub- 
mitted for  approval  to  the  department  of  finance. 

If  the  capital  subscribed  en  commandite  were  desired  to 
be  made  the  basis  of  extended  note  issues,  the  provisions 
set  out  in  paragraph  4  above  were  to  be  applied  to  this 
part  of  the  capital  also. 

9.  In  case  bank  notes  should  not,  on  presentation,  be 
redeemed  in  coin  or  notes  of  the  Riksbank,  the  holder  was 

60 


The     Swedish     Banking     System 

to  be  entitled  to  interest  at  5   per  cent  per  annum  from 
the  date  of  refusal  till  the  date  of  redemption. 

10.  The  bank  was  to  be  entitled,  with  the  consent  of  the 
Crown's  local  representative,  to  realize  part  of  the  capital 
security  specified    above    (see  paragraph   4),  the  issuing 
rights  to  be  diminished  by  the  sum  thus  realized  and  the 
collateral  to  be  replaced  as  speedily  as  possible. 

1 1 .  Should  the  annual  audit  of  accounts  show  that  the 
reserve  fund  and  10  per  cent  of  the  ordinary  capital  was 
lost,  liquidation  of  the  bank's  affairs  was  required  unless 
a  special    general    meeting    of    shareholders,   summoned 
for  the  purpose,  should  resolve  to  subscribe  within  three 
months  a   sum   sufficient    to  restore  the  capital    to   its 
former    amount. 

The  law  of  1864  was  again  revised  in  1874,  this  time 
with  full  accord  between  the  King  and  the  Parliament. 
The  alterations  were  few,  and  may  be  briefly  summarized 
as  follows: 

1.  In  reference  to  the  securities  deposited  under  public 
control,  representing  a  part  of  the  capital,  the  upper  limit 
of  75  per  cent  was  omitted. 

At  least  half,  in  place  of  a  third,  were  to  be  in  readily 
realizable  interest-bearing  bonds. 

2.  Monthly,  in  place  of  quarterly,  accounts  were  to  be 
rendered  to  the  finance  department,  according  to  a  form 
to  be  determined  by  that  department,  to  which  the  rights 
previously  exercised  on  behalf  of  the  Crown  as  to  secur- 
ing information  regarding  the  bank's  affairs  were  now 
assigned. 


61 


National    M  o  n  et  ar  y     Commission 

3.  Notes  might  be  issued  on  the  security  of  the  reserve 
fund  as  well  as  of  the  capital,  so  far  as  represented  by  the 
class  of  securities  required  for  the  capital-guaranty  fund, 
such  securities  being  likewise  placed  in  the  public  deposi- 
tory. 

The  provision  that  securities  held  against  credits 
opened  might  serve  as  backing  for  notes  was  replaced 
by  a  provision  that  the  commercial  assets  (claims  due) 
might  so  serve,  but  with  the  stipulation  that  the  bank 
should  hold  at  least  10  per  cent  of  the  amount  of  its  capital 
in  gold  coin  of  the  realm. 

Any  excess  above  the  10  per  cent,  and  gold  bullion  or 
foreign  coin,  might  also  serve  as  note  backing. 

Deposits  with  the  Riksbank  no  longer  appear  as  among 
the  items  determining  the  extent  of  the  note  issues 
allowed. 

A  breach  of  the  provisions  as  to  the  limitation  of  the 
amount  of  notes  outstanding,  if  not  remedied  within  ten 
days,  was  to  involve  a  fine  of  1,000  kronor  for  each  day 
the  excess  existed.  Repeated  breaches  of  these  provi- 
sions might  involve  forfeiture  of  the  note-issuing  privilege. 

4.  Permission  to  issue  notes  of  5  and  10  kronor  in  value 
was  granted  only  provisionally. 

5.  The  notes  must  be  redeemed  in  gold  coin  of  the 
realm  on  presentation.     Interest  for  any  period  during 
which  notes  were  not  so  redeemed  to  run  at  6  per  cent  per 
annum. 

6.  Should  part  of  the  securities  deposited  as  capital 
guaranty  be  realized,  as  before  provided,  to  meet  bank 
notes  presented  for  redemption,  the  diminution  of  the 


The     Swedish     Banking     System 

permissible  maximum  issue  to  be  one  and  one-half  times 
the  amount  so  realized. 

It  may  be  noted  here  that,  at  the  end  of  1875,  one 
bank  is  recorded  as  having  exceeded  its  legal  limit  of 
issue,  though  not  for  long  enough  to  incur  a  fine. 

The  point  of  greatest  importance  in  the  new  law  is  the 
requirement  of  redemption  in  gold  coin.  It  was  the  new 
mint  law  of  1873,  establishing  the  gold  standard  in  Sweden, 
which  led  to  this  change  from  redemption  in  notes  of  the 
Riksbank  to  redemption  in  gold,  and  this  provision  was 
that  which  encountered  the  greatest  opposition.  The 
notes  of  the  Riksbank  had  so  long  (since  January  n, 
1726)  been  legal  tender  that  even  a  partial  dethronement 
from  that  position  could  not  be  accepted  readily.  It 
involved,  of  course,  an  increased  holding  of  gold  at  the  head 
offices,  which  alone  were  liable  to  redeem  bank  notes,  the 
branches  being  free  from  this  liability.  The  exclusion  of 
the  Riksbank  note  from  the  power  to  redeem  legally  an 
enskilda  bank  note  carried  with  it  the  exclusion  of  balances 
held  at  the  Riksbank  from  the  legal  note  backing.  Re- 
turning for  a  moment  to  the  position  created  by  the  decree 
of  1864,  it  is  to  be  noted  that  in  that  year  alone  eight  new 
charters  were  granted.  Two  of  these  banks  ceased  inde- 
pendent operations  within  a  comparatively  short  time, 
one  of  them  being  absorbed  after  three  and  one-half  years 
by  the  oldest  of  the  enskilda  banks,  which  operated  in  the 
same  town  in  which  the  new  bank  established  itself.  The 
other  was  similarly  absorbed  by  an  enskilda  bank 
dating  from  1856  after  nearly  nine  years  of  independent 
activity.  Through  the  forgeries  of  a  client,  it  suffered 
severe  losses  (in  which  other  banking  institutions  were 

63 


National    M on  et ar y     Commission 

also  involved),  and  in  1869  a  general  meeting  of  share- 
holders resolved  on  a  combination  with  another  enskilda 
bank  in  the  same  town.  Neither  note  holders  nor  share- 
holders suffered  any  loss  through  the  liquidation  of  its 
affairs,  concluded  in  1874. 

In  1865  four  new  enskilda  banks  were  chartered,  so  that, 
after  standing  at  12  from  1857,  the  number  was  doubled 
in  the  two  years  1864-65.  In  1866  yet  another  bank  was 
chartered. 

In  charters  granted  after  this  date  there  was  included  a 
new  provision,  namely,  that  the  banks  thus  established 
should  subject  themselves  to  any  new  regulations  which 
might  be  imposed  on  enskilda  banks,  without  awaiting 
the  determination  and  renewal  of  the  charters.  For  the 
earlier  banks  new  stipulations  could  only  be  imposed  on 
renewing  the  charters. 

In  1868  two  new  charters  were  granted,  in  1869  one,  and 
in  1873  one-  The  next  fell  mto  the  period  governed  by 
the  law  of  1874,  being  granted  in  1876.  Only  one  later 
charter  was  granted,  namely,  in  1893. 

The  control  of  the  department  of  finance,  for  which 
provision  was  made  in  the  law  of  1874,  was  carried  out  by 
the  appointment  of  a  special  officer,  called  the  inspector 
of  banks,  in  1877.  From  1868  there  are  printed  records 
setting  forth  a  brief  summary  of  the  annual  balance  sheets, 
and  the  quarterly  accounts,  provided  for  in  1846,  which 
are  also  printed,  beginning  with  those  of  December,  1866. 
From  1871  the  printed  record  is  partly  a  brief  monthly 
account,  partly  a  fuller  quarterly  statement,  and  from 
1875  a  tolerably  full  monthly  statement  has  been  printed. 


64 


The     Swedish     Banking     System 

The  control  of  the  inspector  could  not,  of  course,  pre- 
vent all  abuses.  In  one  case,  a  bank  which  had  been 
established  for  twenty  years,  and  secured  a  prolongation 
of  its  charter  for  a  third  term,  was  brought  to  ruin  by 
frauds  on  the  part  of  a  director  extending  over  a  term  of 
years.  He  had  succeeded  in  keeping  from  the  knowledge 
of  all  other  officials,  except  perhaps  a  cashier  who  died 
before  the  matter  was  cleared  up,  the  fact  that  he  was  using 
large  sums,  both  of  old  notes  supposed  withdrawn  from 
circulation  and  destroyed,  and  of  new  notes  issued  with- 
out the  knowledge  of  those  who  should  have  controlled 
their  issue,  to  support  a  sugar  factory  in  which  he  was 
interested.  The  details  of  the  case  need  not  be  enlarged 
upon,  but  it  may  be  mentioned  that  the  director  in  ques- 
tion was  sentenced  to  six  years'  hard  labor.  The  bank 
disappeared  from  the  list  after  1878.  No  call  on  the  un- 
limited liability  of  the  shareholders  was  necessary. 

It  may  be  remarked  in  this  place,  as  of  interest  in  its 
bearing  on  the  public  estimation  which  the  notes  of  the 
enskilda  banks  attained,  that  in  1869  the  Riksbank  began 
to  accept  them  in  payments.  It  is,  perhaps,  rather  to  be 
remarked  that  their  acceptance  by  the  central  institution 
should  have  been  so  long  delayed.  As  the  circulation  of 
the  Riksbank  had  been  exceeded  by  that  of  the  enskilda 
banks  by  this  time,  not  occasionally  only,  but  as  a  regular 
phenomenon,  the  position  of  the  enskilda  bank  note  could 
not  but  receive  recognition. 

The  suppression  of  the  enskilda  bank  note  of  5  kronor 
was  resolved  on  as  from  December  31,  1879.  That  is,  all 
such  notes  presented  after  that  date  at  the  banks  were 
retired,  and  no  new  ones  issued.  As  a  compensation  to  the 

•22150 — 10 5  65 


OF   tHF 

UNIVERSITY 
of.         J 


National    Monetary     Commission 

issuers  for  assisting  in  the  work  of  retiring  these  notes, 
under  certain  conditions  they  were  granted  discounts  on 
favorable  terms  at  the  central  institution,  the  5 -kroner 
notes  of  that  institution  being  placed  at  the  disposal  of  the 
enskilda  banks  in  this  way  to  a  maximum  amount  equal 
to  the  average  of  their  own  circulation  of  such  notes  in  the 
preceding  twelve  months.  The  rate  of  discount  arranged, 
for  three-months'  bills,  was,  for  1880,  2  per  cent,  and  for 
1 88 1  to  1884,  3  per  cent,  at  the  end  of  which  period  this 
special  provision  lapsed. 

In  1879,  about  one-third  of  the  total  issues  of  the  en- 
skilda banks  were  in  the  5-kronor  denomination,  about  one- 
third  in  the  lo-kronor,  and  one-third  in  other  denomina- 
tions. On  December  31,  1879,  notes  to  the  value  of 
17>354>oo°  kronor  m  5-kronor  notes  were  outstanding.  In 
nine  months  they  were  reduced  to  less  than  2,000,000 
kronor,  and  by  April  of  1881  to  less  than  1,000,000,  the 
retirement  of  the  residuum  being  a  slower  matter.  The 
average  total  issues  of  their  own  notes  by  the  enskilda  banks 
were  somewhat  greater  in  1880  and  in  1881  than  in  1879, 
and  the  increased  issues  of  lo-kronor  notes  accounted  for 
roughly  two-thirds  of  the  lapsed  5-kronor  issues,  the  increase 
of  larger  notes  balancing  the  remainder  of  the  decrease. 
The  increase  of  the  5-kronor  circulation  of  the  Riksbank's 
notes  between  the  end  of  1879  and  the  end  of  1880  was 
less  than  half  the  decrease  of  the  enskilda  banks'  notes  of 
the  same  denomination,  and  in  1881  there  was  even  a 
small  decrease.  The  total  circulation  of  this  denomination 
of  note,  in  fact,  decreased  as  the  first  and  immediate  result 
of  the  cessation  of  issues  by  the  enskilda  banks.  The 
issues  of  5-kronor  notes  by  these  banks  had  averaged 

66 


The     Swedish     Banking     System 


over  14,000,000  kroner  in  value  in  1879.  The  extent  of 
the  special  discount  facilities  accorded  by  the  Riksbank, 
as  shown  in  the  balance  sheets  of  the  central  institution 
at  the  end  of  the  yea/s  affected,  1880  to  1884,  varied  from 
8,500,000  kronor  to  over  9,500,000  kroner. 

The  precise  place  of  the  5 -kronor  note  in  the  fluctua- 
tions of  the  circulation,  month  by  month,  while  this  de- 
nomination was  issued  by  the  enskilda  banks,  cannot  be 
determined,  as  the  distinction  of  notes  of  various  denomi- 
nations begins  only  with  April,  1879.  Thus  the  figures 
for  the  end  of  the  years  can  afford  but  a  partial  view  of 
the  relative  importance  of  these  small  notes.  The  out- 
standing issues  at  the  end  of  1879  were  larger  than  usual 
in  comparison  with  those  of  the  other  months  of  the  year. 

In  the  years  immediately  following  the  restriction  of 
the  denomination  of  notes  permitted  to  the  enskilda  banks 
the  issues  of  the  Riksbank  increased  relatively  to  those 
of  the  enskilda  banks,  as  might  be  expected.  The  follow- 
ing comparative  table  is  based  on  the  figures  for  the  end 
of  each  quarter  of  the  years  named,  and  presents  the 
relative  positions  before  and  after  the  change: 

Percentage  of  the  total  note  circulation  issued  by  the  Riksbank  and  the  enskilda 
banks,  respectively. 


Year. 

Riksbank. 

Enskilda 
banks. 

Year. 

Riksbank. 

Enskilda 
banks. 

1875 

38.  7 

61  3 

1879 

59  8 

1876  

33  •  7 

66.3 

1880 

43-  4 

56.6 

1877 

33    3 

66   7 

1881 

c7   g 

1878 

36.3 

63.  7 

1882 

41    3 

58   7 

Average  

35-5 

64.5 

Average  

41.8 

58.2 

67 


National    Monetary     Commission 

These  figures  suggest  that  the  loss  of  the  privilege  of 
issue  of  5-kronor  notes  by  the  enskilda  banks  gave  a  tem- 
porary setback  to  their  note  issues.  How  far  the  eco- 
nomic conditions  of  the  time,  affecting,  perhaps  in  a 
different  manner,  the  fields  of  activity  of  the  different 
institutions,  may  have  contributed  to  the  movement 
shown  cannot  be  determined. 

The  association  with  the  ordinary  shareholders,  sub- 
jected to  the  unlimited  liability  of  a  partnership,  of 
others  enjoying  limited  liability,  appears  to  have  occurred 
first  after  the  new  ordinance  of  1874  came  into  force. 
Three  of  the  banks  issued  a  small  amount  of  such  shares 
in  1875  and  1876,  all  paying,  at  first,  6  per  cent  to  these 
special  shareholders — preference  shareholders,  one  might 
perhaps  call  them — while  the  ordinary  shareholders  were 
receiving  higher  dividends.a  In  1886,  on  the  renewal  of 
charters,  one  of  the  three,  while  largely  increasing  its 
ordinary  capital,  reduced  its  preference  shares  to  less  than 
one-half,  and  the  rate  paid  on  them  to  5  per  cent.  A  second 
slightly  adjusted  the  amount  of  preference  and  ordinary 
capital.  At  the  end  of  1888  the  former  paid  out  the  pref- 
erence shareholders  entirely,  and  a  year  later  a  further 
small  reduction  in  preference  shares  took  place  in  the 
second,  while  the  two  banks  still  retaining  such  shares 
reduced  the  rate  paid  on  them  to  5  per  cent  in  1889. 

The  total  of  preference  shares  remained  at  1,000,000 
kronor  till  1898,  while  the  ordinary  capital  increased  to  over 
60,000,000  kronor.  In  1898  the  Stockholm  Bank,  whose 
introduction  of  new  methods  forty  years  before  had  given 

a  In  the  case  of  one  bank  the  preference  shareholders  shared  equally  with 
ordinary  shareholders  when  the  dividends  of  the  latter  exceeded  6  per  cent. 

68 


The     Swedish     Banking     System 

such  a  stimulus  to  Swedish  banking  enterprise,  added  to 
its  6,000,000  kronor  of  ordinary  capital  (since  doubled) 
3,000,000  kronor  of  preference  capital  at  5  per  cent. 
The  following  year  two  issues  of  250,000  kronor  each  of 
preference  capital  occurred,  both  at  5  per  cent,  one  by  a 
bank  not  previously  having  that  class  of  share,  the  other 
by  one  of  the  two  which  had  had  preference  shares  for 
nearly  a  quarter  of  a  century.  In  1904  one  other  bank 
introduced  the  preference  share,  but,  as  it  entered  into 
combination  with  an  ordinary  joint-stock  bank  two  years 
later,  its  experience  as  a  bank  en  commandite  was  short. 
In  1899  and  in  1905  one  of  the  two  oldest  of  the  banks 
of  this  class  increased  its  preference  capital  by  250,000 
kronor  on  each  occasion,  and  it  now  stands  at  1,000,000 
kronor,  one-fifth  of  the  total  share  capital.  In  1906  the 
other  of  the  two  oldest  en  commandite  banks  added  250,000 
kronor  to  its  shares  en  commandite.  The  reduction  of  the 
preference  dividend  by  the  Stockholm  Bank  to  4^  per  cent 
in  1904,  and  the  disappearance  from  the  list  of  enskilda 
banks  in  1905  of  the  only  other  which  had  this  form  of 
capital  (having  had  it  since  1 899  only) ,  completes  the  record 
of  the  actual  use  of  the  powers  to  admit  limited  share- 
holders in  banks  with  unlimited  liability  imposed  on  ordi- 
nary shareholders.  At  the  end  of  1 908  the  ordinary  capital 
of  the  17  then  remaining  enskilda  banks  amounted  to 
113,750,000  kronor,  the  preference  capital  to  4,750,000 
kronor,  issued  by  3  banks  only,  the  reserve  funds  being 
nearly  74,000,000  kronor  and  surplus  over  14,000,000 
kronor.  The  final  stage  in  the  cessation  of  the  note-issuing 
privileges  of  the  enskilda  banks  is  dealt  with  later  on  in  the 


69 


National    Monetary     Commission 

completion  of  the  account  of  the  Riksbank's  position. 
Here  it  need  be  referred  to  but  briefly.  The  discussion  of 
plans  for  the  concentration  of  the  note  issues  in  the  hands  of 
the  Riksbank  proceeded  no  less  actively  than  had  been  the 
case  for  half  a  century  at  least,  but  no  agreement  was 
arrived  at  till  1897.  Meanwhile  a  preparatory  step  was 
taken  in  arranging  for  the  concurrent  termination  of  all 
the  enskilda  bank  charters  at  the  end  of  1893,  those 
which  did  not  normally  lapse  at  that  date  being  renewed 
for  less  than  the  ordinary  term  of  ten  years. 

As  recorded  later,  the  final  arrangement,  effected  in 
1897,  contemplated  the  entire  cessation  of  enskilda  bank 
issues  with  1903,  and  an  arrangement  generally  similar 
in  purpose  to,  though  more  extended  in  scope  than,  that 
made  in  1879  m  regard  to  the  withdrawal  of  5-kronor 
notes,  was  effected.  The  terms  of  this  arrangement  were 
revised  in  1901,  considerably  to  the  advantage  of  the 
enskilda  banks.  The  Riksbank  was  empowered  to  make 
terms  with  the  enskilda  banks  for  their  withdrawal  from 
the  business  of  note  issuing  earlier  than  the  end  of  1903, 
when  they  were  to  lose  the  right  to  carry  it  on.  The 
terms  set  out  in  the  law  of  1897  became  effective  only  in 
the  case  of  one  bank  which  was  converted  into  a  limited 
liability  banking  company  at  the  end  of  1898,  that  is  to 
say,  at  the  date  when  the  act  of  1897  came  into  force. 

The  revision  of  the  terms  offered  to  enskilda  banks  as 
the  price  of  an  early  abandonment  of  note  issues,  author- 
ized by  a  law  of  May  3,  1901,  was  quickly  effective  in 
securing  a  commencement  of  the  process  of  transference 
of  issuing  rights  to  the  Riksbank.  The  terms  of  the 
bargain  are  stated  later  in  this  account  (pp.  90-93) ,  and  it  is 

70 


The     Swedish     Banking     System 

sufficient  here  to  describe  them  as  an  offer  of  loans  for  a 
term  of  years  at  relatively  low,  rates  of  interest  by  the 
Riksbank  to  the  several  enskilda  banks,  in  proportion  to 
to  the  extent  of  their  note  circulation  at  the  opening  of 
the  year  1901,  on  the  condition  that  all  the  branches  or 
offices  which  were  open  at  the  beginning  of  1896  should 
be  maintained.  Similar  advances  were  to  be  made  even 
to  the  banks  which  adhered  to  their  note-issuing  privileges 
till  their  legal  termination  at  the  end  of  1903,  as  partial 
compensation  for  the  cessation  of  the  privilege  of  note 
issue.  What  is  particularly  worthy  of  note  is  that  the 
facilities  thus  offered  were  judged  by  the  enskilda  banks 
to  be  worth  while  accepting  as  the  price  of  an  earlier 
termination  of  issue  of  their  own  notes.  In  effect  they 
were  a  means  of  substituting  the  Riksbank  notes  for  the 
enskilda  bank  notes. 

The  oldest  and  most  important  of  the  enskilda  banks 
was  the  first  to  accept  the  terms,  and  though  the  law  was 
only  promulgated  early  in  May,  1901,  this  bank  ceased 
to  issue  its  own  notes  from  the  end  of  June.  Its  issues 
had  amounted  to  nearly  10,000,000  kronor,  or  fully  one- 
eighth  of  all  the  enskilda  bank  notes  outstanding  at  the 
end  of  June,  1 90 1 .  Three  months  later  four  other  banks  fol- 
lowed suit,  their  aggregate  issue  somewhat  exceeding  that 
of  the  bank  first  mentioned.  In  the  course  of  1901  and 
1902  arrangements  were  similarly  made  with  most  of  the 
other  enskilda  banks,  and  in  January,  1903,  the  outstand- 
ing notes  of  enskilda  banks  but  little  exceeded  one-quarter 
of  the  aggregate  of  two  years  earlier,  while  only  three 
banks  were  still  issuing  their  own  notes.  By  about  the 
middle  of  1903  these  three  had  also  entered  into  arrange- 

71 


National    Monetary     Commission 

ments  for  anticipating  the  legal  cessation  of  their  note 
issues,  so  that  by  the  end  of  December,  1903,  the  notes 
not  yet  retired  were  little  more  than  5  per  cent  of  the 
enskilda  bank  circulation  at  the  end  of  1900. 

The  retirement  of  the  remaining  notes  proceeded  as 
rapidly  as  they  were  presented  at  any  bank.  The  circula- 
tion of  Riksbank  notes  advanced  so  rapidly  meanwhile 
that  the  total  circulation  at  the  end  of  1903  was  over  10 
per  cent  in  excess  of  that  at  the  end  of  1900.  A  law  of 
June  7,  1889,  na-d  paved  the  way  for  a  reasonably  rapid 
withdrawal  of  the  notes  of  the  enskilda  banks  from  circu- 
lation by  providing  for  the  issue,  on  application  by  any 
such  bank,  of  a  royal  proclamation  requiring  all  holders 
of  notes  of  the  bank  in  question  to  present  them  for 
redemption  within  two  years  of  such  proclamation,  after 
which  date  all  right  to  payment  should  cease.  The  issue 
of  such  a  proclamation  was  provided  for,  however,  only 
in  the  case  of  banks  which  had  not  become  insolvent. 
The  powers  were  exercised  in  the  case  of  various  of  the 
banks  which  were  transformed  from  unlimited  to  limited 
companies.  The  proclamations  were  required  to  be  read 
in  the  churches  and  published  in  the  Official  Gazette. 
Under  these  arrangements,  all  enskilda  bank  notes  ceased 
to  be  legally  current  after  the  end  of  March,  1906. 

Of  the  27  enskilda  banks  existing  at  the  date  of  the  pass- 
ing of  the  law  conferring  the  monopoly  of  note  issue  on  the 
Riksbank,  17  still  continue  as  banks  with  unlimited  lia- 
bility, 10  have  either  been  converted  into  ordinary  joint- 
stock  banks,  or  been  absorbed  by  such  banks,  or  by  other 
enskilda  banks.  The  capital  represented  by  these  10, 
reckoned  as  at  the  beginning  of  the  last  year  of  their  opera- 

72 


The     Swedish     Banking     System 

tions  as  enskilda  banks,  was  47,850,000  kroner,  and  the 
total  of  capital,  reserve,  and  surplus  was  75,75o,oookronor. 
The  increase  of  capital  of  the  remaining  enskilda  banks  has, 
however,  fully  offset  this  decrease,  the  amount  at  the  end 
of  1908  being  118,500,000  kronor  of  share  capital,  and 
88,000,000  kronor  of  other  proprietors'  funds,  as  against 
73,250,000  kronor  and  33,750,000  kronor,  respectively,  ten 
years  earlier. 

As  already  stated,  one  enskilda  bank  was  converted  into 
a  limited-liability  bank  at  the  end  of  1898.  Others  took 
the  same  course  later,  one  in  1901,  three  in  1902,  two  in 
1904,  and  one  in  each  of  the  years  1905, 1906,  and  1907.  In 
each  year  since  1897  the  total  amount  of  the  dividends 
distributed  by  the  enskilda  banks  has  been  larger  than  in 
that  or  any  earlier  year.  Comparing  the  five  years  follow- 
ing 1898  with  the  five  years  ending  1908,  the  results  shown 
are  as  follows: 

Average  Proportion  of  Profits  and  Expenses  to  Capital. 


1899-1-903. 

1904-1908. 

Ordinary 
share 
capital. 

Total  pro- 
prietors' 
funds  (cap- 
ital, re- 
serves, and 
surplus). 

Ordinary 
share 
capital. 

Total  pro- 
prietors' 
funds  (cap- 
ital, re- 
serves, and 
surplus). 

Gross  profits 

Per  cent. 
24.9 
8.7 

13-8 
9-  7 

Per  cent. 
14.  5 
5-  i 

8.  i 
5.7 

Per  cent. 
24-5 
7-5 

13-9 
ii.  3 

Per  cent. 
13-0 
4.  o 

7-3 
6.0 

Expenses  

Net    profits    after    deducting    writings 
down 

Dividend  to  ordinary  shareholders  

The  capital  has  increased  by  30  per  cent  in  the  interval 
between  the  two  periods  here  represented  and  the  total 


73 


National    Monetary     Commission 

of  proprietors'  funds  by  45  per  cent,  in  spite  of  the  reduc- 
tion of  the  average  number  of  banks  in  operation  from  25 
to  19.  In  some  cases  ordinary  joint-stock  banks  have  been 
absorbed  by  enskilda  banks,  thus  partly  offsetting  the 
movement  in  the  contrary  sense. 

The  banks  are  no  longer  limited  by  the  requirement 
of  setting  aside,  as  a  kind  of  guaranty  fund  for  note 
holders,  60  or  more  per  cent  of  the  subscribed  capital, 
in  the  form  of  approved  securities,  mainly  of  the  easily 
realizable  variety,  and  therefore  yielding  a  relatively 
low  return;  neither  are  they  required,  as  before,  to  keep 
10  per  cent  of  their  capital  in  gold.  The  gold  holdings 
have,  in  fact,  been  reduced  to  mere  till  money,  and  the 
cash  reserves  are  now  formed  of  Riksbank  notes,  supple- 
mented by  deposits  or  credits  at  the  Riksbank,  drafts 
on  which  serve  many  of  the  purposes  of  cash  in  hand. 

The  comparison  of  conditions  before  and  after  the  loss 
of  note-issuing  rights  is  not  necessarily  indicative  of  the 
results  of  this  change  in  the  privileges  and  obligations  of 
the  banks.  The  period  is  one  which  has  witnessed  great 
expansion  all  over  the  world,  and  in  Sweden  as  well  as 
elsewhere,  so  that  the  growth  of  banking  business  is 
related  to  this  industrial  and  commercial  movement,  as 
well  as  to  the  local  legislation.  It  is  clear  that  capital 
has  been  forthcoming  in  substantial  amounts  for  en- 
larging the  operations  of  banks,  both  with  unlimited 
and  with  limited  liability.  On  January  i,  1904,  there 
were  20  ordinary  joint-stock  banks  with  a  capital  of  at 
least  1,000,000  kronor.  Five  years  later  there  were  28 
such  banks,  including  those  into  which  certain  of  the 


74 


The     Swedish     Banking     System 

enskilda  banks  had  been  transformed  or  absorbed.  The 
capital  had  increased  by  96  per  cent  in  the  five  years 
and  was  211,000,000  kronor  at  the  end  of  1908.  Adding 
reserves,  the  total  of  proprietors'  funds  was  a  little  over 
325,000,000  kronor,  an  increase  of  92  per  cent  in  the  five 
years.  The  enskilda  banks  which  were  absorbed  in  the  in- 
interval  had,  at  the  time  of  absorption,  capital  and  reserves 
amounting  to  about  a  quarter  of  the  increase  shown  in 
those  of  the  joint-stock  banks.  Apart  from  the  effect 
of  these  transfers  from  the  one  group  of  banks  to  the 
other,  the  limited  banks  do  not  appear  to  have  increased 
their  capital  more  rapidly  than  the  unlimited.  The 
latter  have,  apparently,  appealed  to  subscribers  no  less 
favorably  than  the  former.  The  preceding  table  appears 
to  reflect  some  relative  reduction  of  expenses,  a  some- 
what larger  appropriation  to  writing  down  the  value  of 
assets,  and  somewhat  better  results  for  shareholders 
since  the  cessation  of  private  note  issues.  But,  as  re- 
marked above,  these  results  can  not  be  dissociated  from 
the  condition  of  business  in  the  years  included  in  the 
comparison.  The  writings  down  in  1907,  and  to  a  less 
degree  in  1908,  absorbed  large  sums.  But,  allowing  for 
the  change  in  the  number  of  banks,  the  sums  paid  as 
dividends  were  not  reduced,  though,  as  the  capital  on 
which  they  were  paid  was  largely  increased  in  1907,  the 
average  rate  fell  from  13/4  per  cent  in  1906  to  9^  per 
cent  in  1907  and  rose  to  n  per  cent  in  1908. 

The  reserves  (including  surplus)  of  the  enskilda  banks 
have  been  strengthened,  relatively  to  the  capital,  in  the 
years  covered  by  the  above  table  from  about  70  to  over 


75 


National    Monetary     Commission 

90  per  cent,  and  are  much  in  excess,  relatively,  of  those  of 
the  limited  liability  banks,  the  proportion  for  which  is 
about  55  per  cent.  The  average  capital  of  the  unlimited 
banks  is  about  7,000,000  kronor,  as  compared  with 
7,500,000  kronor  for  the  limited  banks,  the  average 
amount  of  proprietors'  funds  being  not  very  different, 
namely,  11,600,000  kronor  for  the  limited,  12,100,000 
kronor  for  the  unlimited  banks.  In  1897,  when  the  new 
law  was  passed,  the  27  unlimited  banks  then  existing 
averaged  under  4,000,000  kronor  of  proprietors'  funds, 
and  the  n  limited  banks  of  that  date  which  had  each 
over  1,000,000  kronor  of  capital  averaged  a  trifle  over 
5 ,000,000  kronor  of  proprietors'  funds.  At  the  beginning  of 
the  following  year  there  were  15  such  limited  banks,  with 
an  average  of  about  4,709,000  kronor  of  proprietors'  funds. 

The  growth  in  the  number  of  the  ordinary  banks,  and  in 
the  importance  of  the  banks  of  both  classes,  is  reflected  in 
these  figures.  But  they  do  not  suggest  that,  relatively, 
the  unlimited  banks  have  suffered  seriously  by  the  loss  of 
the  right  of  note  issue.  The  position  both  of  the  private 
banks  and  of  the  Riksbank  during  the  year  1907  will  be 
examined  somewhat  more  in  detail  later. 

The  provisions  of  the  new  law  regulating  the  unlimited 
banks  are  stated  in  Appendix  III. 

It  should  be  mentioned  that  the  rights  of  note  issue  were 
not  enjoyed  by  the  enskilda  banks  without  some  payment 
to  the  funds  of  the  State.  The  Parliament  of  1859-60 
imposed  a  tax  at  the  rate  of  one-fifth  of  i  per  cent  on  the 
maximum  circulation  of  each  year  as  the  price  of  the 
privilege  of  issue.  Ten  years  later  the  rate  was  raised  to 


The     Swedish     Banking     System 

one-half  of  i  per  cent,  and  during  the  latter  part  of  the 
duration  of  the  right  of  issue  it  stood  at  i  per  cent.  It  is 
clear  that  the  banks,  in  accepting  the  terms  offered  for 
conceding  the  monopoly  of  note  issue  to  the  Riksbank, 
could  not  but  be  influenced  by  the  knowledge  that  their 
gains  from  the  note  issues  could  be  absorbed  by  the 
State  by  the  simple  process  of  raising  the  rate  of  this  tax. 
They  chose  rather  to  be  bought  out  than  taxed  out  of 
their  privileges. 


77 


CHAPTER  V. 


THE  LATER  HISTORY  OF  THE  RIKSBANK. 

As  already  stated,  the  Riksbank  was  put  on  a  new  foot- 
ing in  1830,  when  the  circulation  of  the  bank's  notes  at 
37  X  Per  cent  of  the  silver  represented  by  their  face  value 
was  authorized.  Its  capital  was  fixed  at  4,400,000  bank 
dalers,  or  6,600,000  dalers  currency,  the  balance  of  an 
advance  made  to  the  State  for  war  purposes  in  1808.  On 
the  resumption  of  specie  payments  in  1834  it  was  found 
possible  to  provide  a  capital  fund  of  7,500,000  dalers  cur- 
rency, which  was  increased  to  15,000,000  from  January  i, 
1845,  by  a  transfer  from  the  reserve  fund  which  had  been 
accumulated  in  the  meantime.  In  1 864  the  capital  reached 
25,000,000  dalers,  30,000,000  kronor  in  1879,  35,000,000  in 
1 882,  in  1885  40,000,000,  in  1890  45, 000,000,  and  it  was  fixed 
at  50,000,000  kronor,  which  it  had  reached  in  1893,  by  the 
law  of  1897.  The  fixed  reserve  fund  remained  at  5,000,000 
kronor  from  1873,  when  it  was  first  reached,  till  1900. 
At  the  end  of  1902  a  special  fund  of  1 2,500,000  kronor  was 
constituted  out  of  reserved  earnings  for  a  special  class  of 
loans,  and  by  the  end  of  1908,  in  addition  to  a  reserve 
fund  of  10,419,000  kronor,  an  almost  equal  sum  in  sur- 
plus, not  definitely  assigned  to  the  reserve  fund,  was  able 
to  be  shown  in  the  balance  sheet.  Thus  a  sum  of  83,323,708 
kronor  (say  $22,220,000)  represents  what,  in  privately 
owned  banks,  would  be  proprietors'  funds  employed  in  the 


The     Swedish     Banking     System 

business.  This  has  been  accumulated  entirely  out  of 
profits,  and  that  in  spite  of  the  constant  payment  of  a 
large  share  of  those  profits  to  the  public  funds.  Thus,  of 
the  net  profits  of  the  years  1835-1839,  the  national  debt 
office  received  70  per  cent,  though  of  those  of  the  follow- 
ing four  years  it  received  none.  For  1844-1847  and 
again  for  1851-1853  and  for  1860-1865  it  received  a  very 
large  part  of  the  profits,  while  for  1867  it  received  the 
whole  of  them. 

While  the  bank  gradually  struggled  to  accumulate  the 
capital  of  25,000,000  dalers  originally  contemplated  in  1830, 
and  only  attained  it  in  1864,  the  reserve  fund  originally 
intended  not  being  attained  for  another  decade,  the 
national  debt  office  was  assigned  26,500,000  dalers  of  profits 
to  the  17,500,000  dalers  reserved  for  adding  to  the  bank's 
capital.  In  the  next  ten  years  1865-1874,  11,000,000  out 
of  18,000,000  kronor  of  net  profits  were  assigned  to  the 
national  debt  office;  in  the  ten  years  1875-1884,  the  bank 
retained  13,000,000  kronor  and  the  national  debt  office  was 
assigned  over  12,500,000,  and  in  the  ten  years  1885-1894, 
of  nearly  28,500,000  kronor  of  net  profits  the  bank  was 
allowed  to  retain  only  about  7,500,000.  In  the  years 
1898  and  1899  the  entire  net  profit  was  added  to  the 
resources  of  the  bank,  in  preparation  for  the  larger  respon- 
sibilities it  was  about  to  undertake.  As  a  result,  of  the 
net  profits  for  the  nine  years  1895  to  1903,  only  18,500,000 
kronor  were  paid  to  the  national  debt  office,  while 
1 4, 500, ooo  were  employed  in  strengthening  the  position  of 
the  bank.  For  the  five  years  during  which  the  note 
monopoly  has  been  enjoyed  by  the  Riksbank,  while  about 
3,750,000  kronor  have  been  added  to  the  resources  of  the 

79 


National    Monetary     Commission 

bank,  the  national  debt  office  lias  had  assigned  to  it 
nearly  34,000,000  kronor  (about  $9,000,000)  of  bank 
profits.  Now  that  an  adequate  capital  and  reserve  has 
been  accumulated,  the  payment  of  a  large  share  of  the 
ample  profits  to  the  State  is  not  open  to  the  criticism 
naturally  directed  against  that  course  when  the  bank  was 
building  up  its  resources  out  of  the  yearly  gains.  In 
seventy-five  years,  the  national  debt  office  has  received, 
of  the  profits  of  the  bank,  a  sum  of  $33,000,000  (United 
States  currency).  Allowing  for  the  value  of  the  premises 
and  bank  furniture,  not  assigned  any  money  representa- 
tion in  the  bank's  balance  sheet,  it  may  be  said  that 
about  three-fifths  of  the  net  profits  have  been  paid  over 
to  the  State. 

Rules  limiting  the  proportion  between  cash  holdings 
and  circulating  notes  were  framed  in  1830  requiring  the 
provision  of  a  cash  fund  not  less  than  five-eighths  of  the 
circulating  notes.  In  1834  this  was  modified  to  a  two- 
fifths  proportion,  but  even  this  could  not  be  maintained, 
and  in  1843  the  cash  actually  fell  to  only  one-third. 
Under  the  influence  of  the  English  bank  act  of  1844  new 
regulations  were  substituted  for  the  old  in  1845.  On  con- 
dition of  holding  at  least  10,000,000  dalers  currency  in  cash, 
a  fiduciary  issue  of  30,000,000  dalers  was  permitted — a  reg- 
ulation much  more  easily  observed.  The  regulations  of 
1830  had  fixed  the  minimum  cash  holding  at  8,000,000 
dalers  currency  (2,000,000  silver),  so  that  the  requirement 
of  10,000,000  was  a  raising  of  the  limit.  Moreover,  in 
lowering  the  proportion  of  the  cash  at  its  minimum  to  the 
circulation  there  was  included  in  the  latter  not  merely 
notes  but  also  the  amount  due  on  deposits,  on  which  no 

80 


The     Swedish     Banking     System 

interest  was  at  that  time  paid.  The  balance  of  credits 
granted,  but  not  drawn  out,  being  a  demand  obligation, 
was  also  included.  Thus  the  change  was  not  calculated 
to  induce  so  weak  a  position  as  appears  at  first  sight. 
Notes  in  excess  of  the  fiduciary  30,000,000  dalers  and  the 
10,000,000  dalers  against  coin  and  bullion  held  in  Sweden 
might  be  covered  by  metal  en  route  from  abroad,  by  funds 
of  the  bank  on  deposit  in  Hamburg  or  Altona,  and  by  bills 
on  Hamburg  or  Altona  at  not  exceeding  sixty-seven 
days'  currency.  Later  the  currency  of  bills  available  as 
cover  was  extended  to  ninety  days  and  Berlin  and  Lon- 
don included  as  places  at  whieh  they  might  be  payable, 
while  in  1866  foreign  bills  generally  were  admitted.  This 
provision  of  bills  of  exchange  as  cover  for  circulation  was 
used  in  1857  as  a  means  of  evading  the  strict  intentions  of 
the  law.  Though  there  was  no  run  on  the  bank,  its  cash 
decreased  very  rapidly  between  the  end  of  1855  and  the 
middle  of  1857,  owing  to  remittances  abroad.  It  had 
stood  at  about  19,000,000  dalers  in  1850-1852  and  from 
that  had  increased  to  52,000,000  dalers  at  the  end  of  1855. 
By  the  middle  of  1857  it  had  fallen  to  25,000,000  dalers, 
and,  though  the  rapidity  of  the  fall  was  checked  in  1858,  it 
reached  16,700,000  dalers  at  the  end  of  1859.  The  funds 
of  the  bank  being  to  a  large  extent  tied  up  in  long-period 
loans,  the  reserve  could  not  be  replenished  or  the  propor- 
tion of  cash  assets  to  obligations  increased  by  the  process  of 
calling  in  these  loans.  Commercial  loans  had  to  be  re- 
stricted if  the  limit  of  issue  was  not  to  be  exceeded,  and  the 
strain  of  the  restriction  was  severely  felt.  An  association 
was  formed  among  certain  members  of  the  exchange  for 
mutual  assistance,  and  they  presented  for  discount  to  the 

22150 — 10 6  81 


National    Monetary     Commission 

Riksbank  bills  for  large  amounts  drawn  on  a  Swedish  mer- 
chant who  paid  a  visit  to  Hamburg.  As  the  issue  of  notes 
against  these  bills  did  not  touch  the  fiduciary  issue,  drafts 
on  Hamburg  being  legal  cover  for  the  notes,  funds  were  thus 
provided  to  meet  the  need,  and  a  state  loan  of  12,000,000 
dalers  being  raised  abroad  at  this  time,  the  difficulties  of  the 
situation  were  met,  bankruptcy  averted,  and  the  losses  of 
the  bank  due  to  the  crisis  kept  down  to  a  modest  amount. 

The  difficulties  arising  out  of  the  fact  that  the  bank  was 
controlled  by  the  legislative  authority,  without  the  right 
of  supervision  on  the  part  of  the  executive,  had  formed, 
naturally,  the  subject  of  numerous  discussions.  The  old 
plan  of  bringing  in  the  interest  of  private  shareholders  to 
exercise  more  effective  control  was  discussed  anew.  The 
constitution  imposed  an  obstacle  in  the  way,  which  was  in- 
geniously avoided  in  the  proposal  of  an  important  com- 
mittee, whose  report  was  made  in  1860,  to  divide  the  bank 
into  two  parts,  following  the  general  lines  of  the  division 
of  the  Bank  of  England  in  1844.  The  issue  department, 
retaining  the  name  of  the  Bank  of  the  Estates  of  the  Realm, 
would  fulfill  the  terms  of  the  constitution  in  remaining 
under  the  control  and  guardianship  of  the  Parliament 
solely.  The  banking  business  proper  was  to  be  assigned 
to  an  institution  in  which  it  would  be  possible,  if  desired, 
to  join  private  capital  with  that  of  the  State. 

This  proposal,  however,  was  not  accepted  and  realized, 
though  the  discussion  of  the  situation  had  its  influence  on 
the  legislation  of  1864  for  enskilda  banks.  In  1872  the 
use  of  bills  on  foreign  places  as  cover  for  demand  obliga- 
tions was  discontinued,  and  the  balances  of  credits  granted 
but  not  fully  used  were  excluded  from  the  sum  against 

82 


The     Swedish     Banking     System 

which  cash  cover  was  needed,  though  current-account 
balances  remained  a  part  of  that  sum.  The  cover  avail- 
able from  that  time  was,  in  addition  to  the  actual  metal  in 
hand,  precious  metals  held  abroad  or  in  transit  for  ac- 
count of  the  bank  and  balances  due  from  bankers  and 
mercantile  houses  abroad.  The  value  of  silver  coin,  after 
1873,  was  required  to  be  taken  only  at  90  per  cent  of  its 
face  value  and  of  silver  metal  at  rates  to-  be  determined 
by  the  managers  of  the  bank,  and,  naturally,  related  to 
the  current  market  value  of  silver. 

The  strict  provisions  of  the  law  were  overstepped,  in 
regard  to  the  minimum  metal  reserve,  in  1869  and  in 
1870.  In  the  former  year  the  metallic  reserve  fell  below 
10,000,000  dalers  in  twenty-six  weeks,  and  was  at  one  time 
just  under  8,500,000  dalers.  In  1870  there  were  two  weeks 
when  the  metal  reserve  was  under  the  legal  minimum. 
The  note  issue  exceeded  the  legal  maximum  on  one  occa- 
sion, namely  in  the  weekly  account  of  September  30,  1873, 
but  was  already  3,500,000  dalers  under  the  legal  maxi- 
mum in  the  following  week. 

As  means  of  defending  the  reserve,  the  bank's  managers 
were  instructed  to  undertake  the  following  lines  of  busi- 
ness: Dealing  in  gold  and  silver  and  in  foreign  bills  of  ex- 
change, and  the  purchase  and  sale  of  bonds  and  the  debt 
obligations  of  governments.  The  right  of  raising  loans 
abroad  was  also  an  important  element  in  this  connection, 
a  right  which  had  been  included  in  the  regulations  of  1845, 
to  the  amount  of  12,000,000  dalers  currency.  For  such  a 
loan  the  guarantee  of  the  State  followed  on  the  approval 
of  the  Executive  Government,  without  further  formal 


National    Monetary     Commission 

approval  of  the  Parliament.  In  the  preceding,  the  effect 
of  a  loan  in  1857-58  has  been  noticed. 

From  January  i,  1880,  the  minimum  metallic  cash 
holding  was  raised  from  10,000,000  to  15,000,000  kronor, 
and  the  maximum  fiduciary  issue  to  35,000,000,  while  the 
limit  of  the  foreign  credit  just  referred  to  was  raised  from 
12,000,000  to  17,000,000  kronor.  The  abolition  of  the 
5 -kronor  note  of  the  enskilda  banks  was  closely  connected 
with  these  measures  for  facilitating  an  enlarged  circulation. 
It  should  also  be  stated  here  that  the  old  notes  of  i  krona 
had  no  longer  been  issued  after  the  end  of  1875,  and  the 
old  fractional  notes  were  gradually  being  withdrawn  as  they 
were  presented  for  redemption.  Till  1849  notes  below 
the  value  of  i  krona  (then  called  a  daler),  even  as  small 
as  a  quarter  of  a  krona  (6.7  cents),  were  issued. 

In  1887  a  further  modification  in  the  regulations  was 
made,  in  that  the  balances  abroad  available  as  cover  for 
notes  were  now  required  to  be  current-account  balances, 
while  interest-free  deposits  and  the  bank  post  bills  out- 
standing, of  which  an  account  has  been  given  above, 
were  now  excluded  from  the  total  determining  the  legal 
amount  of  cover  to  be  held.  Thus  the  regulations  were 
made  somewhat  more  stringent. 

The  fiduciary  issue  was  also  increased,  subject  to  an  in- 
crease of  the  metallic  reserve.  This  reserve,  four-fifths 
of  which  was  required  to  be  gold,  in  coin  or  bars,  was  in  no 
case  to  fall  short  of  1 5 ,000,000  kronor,  as  before,  but,  should 
it  exceed  this  amount,  an  increase  of  the  fiduciary  issue 
was  permitted,  not  exceeding  in  all  10,000,000  kronor, 
making  the  maximum  45,000,000  kronor.  The  condition 
on  which  any  part  of  this  additional  10,000,000  of  fiduciary 

84 


The     Swedish     Banking     System 

issue  might  be  allowed  was  that  the  metallic  reserve 
should  exceed  15,000,000  kronor  by  30  per  cent  of  the 
amount  by  which  the  fiduciary  issue  exceeded  35,000,000 
kronor.  Thus,  with  a  cash  holding  of  15,000,000  kronor, 
consisting  of  at  least  12,000,000  gold  and  the  remainder 
of  legal  silver  coin  taken,  so  far  as  that  struck  after  1873 
was  concerned,  at  90  per  cent  of  its  face  value,  the  issue 
might  amount  to  50,000,000  kronor  plus  the  amount  of 
the  foreign  current-account  balances;  with  a  cash  holding 
of  1 8,000,000  kronor  (not  less  than  1 4,400,000 gold)  the  total 
issue  might  amount  to  63,000,000  kronor  plus  the  amount 
of  the  foreign  credit  balances.  For  greater  issues  the  excess 
was  required  to  be  completely  covered  by  the  metallic 
reserve  in  excess  of  18,000,000  kronor.  The  actual  rights 
of  issue  were  by  no  means  fully  used.  In  1878  and  1879 
the  total  outstanding  notes  fell  even  below  the  permitted 
fiduciary  issue,  partly  owing  to  the  withdrawal  of  the  old 
fractional  notes.  With  the  cessation  of  the  5 -kronor 
notes  of  the  private  banks  from  the  beginning  of  1880, 
the  outstanding  circulation  of  the  Riksbank  increased, 
but  even  in  1890  the  lowest  of  the  monthly  figures  (end  of 
April  and  July)  were  a  little  less  than  40,000,000  kronor. 
From  1892  onward  the  circulation  increased  rapidly,  and  in 
1899  the  maximum  and  minimum  were  56,400,000  kronor 
(February)  and  75,200,000  kronor  (December),  respec- 
tively. In  these  seven  years  the  average  circulation  of 
the  Riksbank  increased  by  50  per  cent,  and  the  total  note 
circulation  of  all  the  banks  by  40  per  cent. 

After  various  efforts  to  arrive  at  a  satisfactory  solution 
of  the  problem  of  centralizing  the  business  of  note  issue, 
as  already  related,  a  law  was  passed  in  1897  by  which 

85 


National    Monetary     Commission 

the  matter  was  arranged.  The  fact  that  the  new  consti- 
tution then  given  to  the  Riksbank  was  effected,  not  by 
the  use  of  the  royal  prerogative,  but  by  an  act  of  the 
regular  legislative  authorities,  the  Parliament  and  the 
King  in  association  with  one  another,  is  itself  a  notable 
point.  Previously  the  legislation  had  taken  the  form 
of  royal  decrees,  which  were  not  always  in  close  agree- 
ment with  the  legislative  proposals  framed  by  the  Parlia- 
ment. The  new  constitution  rests  on  an  Act  of  Parliament 
duly  assented  to  by  the  Crown,  and  thus,  though  the 
control  of  the  Riksbank  was  still  assigned  to  the  Parlia- 
ment, modifications  of  its  constitution  must  be  effected 
by  combined  action  of  King  and  Parliament,  since  they 
involve  changes  of  a  law  resting  on  their  combined 
authority. 

The  notes  of  the  Riksbank  retain  the  character  assured 
them  by  the  Swedish  constitution,  of  legal  tender,  and 
the  bank  is  required  to  redeem  them  on  demand  in  gold 
coin  at  its  head  office. 

The  capital  of  the  bank  is  fixed  at  50,000,000  kronor 
($13,400,000)  exclusive,  as  had  been  the  case  previously, 
of  bank  premises  and  furniture. 

The  metallic  reserve  is  defined  as  consisting  of  all  the 
domestic  and  foreign  gold  coin  and  gold  bullion,  the 
property  of  the  bank,  within  the  country.  Silver  coin 
is  thus  excluded.  The  metallic  reserve  is  to  be  not  less 
than  25,000,000  kronor  at  all  times. 

The  note  issue  remains  partly  fiduciary,  partly  covered 
by  cash.  As  cash  may  be  reckoned  the  metallic  reserve  as 
above  defined;  gold  coin  or  bullion  deposited  abroad  or  in 


86 


The     Swedish     Banking     System 

transit  therefrom  and  covered  by  insurance;  and  the 
current  account  credit  balances  of  the  bank  with  banks 
and  mercantile  houses  abroad.  The  fiduciary  issue  must 
be  covered  by  easily  realizable  foreign  government  bonds; 
bonds  of  the  Swedish  Government,  of  the  general  mort- 
gage bank,  and  of  other  Swedish  enterprises  which  are 
quoted  on  foreign  stock  exchanges;  and  bills  of  exchange, 
domestic  or  foreign. 

The  maximum  of  the  fiduciary  issue  was  fixed  in  1897  at 
100,000,000  kronor,  but  any  excess  of  the  fiduciary  issue 
over  60,000,000  kronor  was  made  conditional  on  a  metallic 
reserve  exceeding  the  minimum  of  25,000,000  kronor  by 
30  per  cent  of  the  amount  of  such  excess  of  fiduciary  issue, 
Thus  the  full  100,000,000  kronor  of  fiduciary  issue  could 
only  be  reached  when  the  metallic  reserve  was  at  least 
37,000,000  kronor. 

By  a  modification  of  the  law  passed  on  3d  May,  1901, 
these  limitations  of  the  note-issuing  rights  underwent 
important  modifications  and  extensions. 

On  the  one  hand,  the  cash  covering,  so  far  as  it  consists 
of  foreign  credits,  is  now  defined  as  the  amount  of  such 
credits  after  deduction  of  corresponding  debit  amounts, 
net  instead  of  gross  credit  balances.  Further,  the  words 
"mercantile  houses"  are  replaced  by  "banking  houses." 
The  minimum  metallic  reserve  is  raised  to  40,000,000 
kronor,  and  the  fiduciary  issue  (which,  under  the  1897 
Maw,  with  this  metallic  reserve,  would  reach,  but  not  ex- 
ceed 100,000,000  kronor)  may  exceed  its  assigned  amount 
of  100,000,000  kronor  by  the  amount  by  which  the 
metallic  reserve  exceeds  its  minimum  of  40,000,000  kronor, 


National    M  o  n  et  ar  y     Commission 

With  greater  stringency  in  certain  respects,  the  expan- 
sion of  the  fiduciary  issue  to  any  required  extent  is  thus 
provided  for. 

With  these  extensions  of  note  issues,  the  capital  of 
the  bank  was  raised  a  year  later  by  setting  aside  a  sum 
of  12,500,000  kroner  as  a  special  fund  for  the  class  of 
loans  repayable  by  installments  at  fixed  periods.  The 
amount  devoted  to  this  purpose  had  previously  formed 
part  of  the  ordinary  funds  of  the  bank,  from  which  it 
has  now  been  separated.  The  fact  that  these  loans  can 
not  be  called  in  to  meet  an  emergency  renders  them  un- 
suited  as  investments  of  the  general  funds  of  a  note- 
issuing  bank,  and  this  difficulty  was  avoided  in  1897  by 
limiting  their  aggregate  amount,  and  from  1903  by  sepa- 
rating the  fund  from  which  they  were  made  from  the 
general  funds  of  the  bank. 

It  may  be  noted,  before  passing  to  the  provisions  of 
the  law  which  restrict  the  operations  of  the  bank,  that, 
at  the  close  of  1908,  the  outstanding  notes  were,  in  round 
figures,  201,500,000  kronor  ($53,750,000).  The  metallic 
reserve  was  78,200,000  kronor,  and  the  net  foreign  balances 
26,300,000  kronor.  Thus  the  legal  fiduciary  issue  was 
138,200,000  kronor  and  the  issue  covered  by  cash  and 
net  foreign  credits  on  current  account  104,500,000  kronor, 
a  total  of  242,700,000  kronor.  The  reserved  rights  of 
issue  were,  therefore,  41 ,200,000  kronor.  The  outstanding 
notes  exceeded  by  one-third  those  of  the  Riksbank  and  the' 
enskilda  banks  together  a  decade  previously.  It  might 
be  supposed  that  this  growth  would  be  accounted  for  by 
the  fact  that,  now  that  the  rights  of  note  issue  are  no 
longer  enjoyed  by  private  banks,  these  latter  find  it 

88 


The     Swedish     Banking     System 

necessary  to  hold,  as  reserve,  a  large  amount  of  the  notes 
of  the  central  institution.  The  amount  of  the  notes  held 
by  the  several  banks  is  not  stated  separately  from  the 
fractional  currency  and  the  credit  balances  (on  so-called 
"giro"  accounts)  at  the  Riksbank.  The  total  of  these  at 
the  end  of  1908  for  the  17  surviving  enskilda  banks  was 
19,200,000  kronor,  or  little  more  than  6,000,000  kronor  in 
excess  of  the  corresponding  total  at  the  end  of  1898,  and 
just  under  that  for  the  end  of  1901 .  Thus  but  a  small  part 
of  the  increase  of  issues  seems  capable  of  being  accounted 
for  by  the  substitution  of  notes  for  gold  as  reserves  held 
by  the  enskilda  banks.  On  the  other  hand,  the  gold 
held  by  the  enskilda  banks  was  steadily  increasing  during 
the  nineties.  At  the  end  of  1898  it  reached  9,000,000 
kronor,  while  at  the  end  of  1 908  it  was  less  than  the  fiftieth 
part  of  that  amount.  The  gold  held  by  the  Riksbank 
had,  meanwhile,  increased  by  over  43,000,000  kronor,  or 
nearly  five  times  the  amount  by  which  that  held  by 
enskilda  banks  decreased.  It  thus  appears  that  the 
equivalent  of  something  like  two-thirds  of  the  increase  of 
total  notes  outstanding  in  the  ten  years  ending  with  1908 
has  been,  as  a  result  of  the  centralization  of  the  note  issue 
in  the  middle  of  that  period,  added  to  the  gold  reserves 
of  the  country,  while  those  reserves  are  now  wholly 
centralized  under  the  control  of  the  Riksbank.  From  the 
point  of  view  of  those  who  believe  that  a  stronger  gold 
backing  for  the  circulating  medium  was  desirable,  and 
indeed  necessary  for  safety,  the  result  must  be  regarded 
as  eminently  satisfactory.  It  is  impossible  to  believe 
that,  had  the  note  issue  remained  in  the  hands  of  the 
enskilda  banks,  the  addition  to  the  gold  reserves  would 

89 


National    Monetary     Commission 

have  been  as  substantial.  As  an  example  of  the  trend 
of  events  we  may  take  the  figures  for  the  end  of  1892  and 
compare  them  with  those  already  used  for  the  end  of  1898. 
In  that  interval  the  aggregate  note  issue  increased  from 
101,900,000  to  150,100,000  kronor.  The  total  gold  held 
increased  from  24,000,000  to  40,200,000  kronor.  Thus  but 
a  trifle  over  one-third  of  -the  increased  note  issue  is  repre- 
sented in  the  increase  of  gold  holdings.  The  outstanding 
notes  of  the  Riksbank  amounted  to  44,000,000  kronor  at 
the  end  of  1892  and  to  70,800,000  at  the  end  of  1898.  Its 
gold  reserve  at  the  same  dates  was  16,800,000  and 
31,200,000  kronor,  respectively.  Thus  somewhat  over 
one-half  of  the  increase  in  its  notes  outstanding  was  de- 
voted to  strengthening  the  reserve.  The  enskilda  banks 
had  increased  their  outstanding  notes  from  57,900,000  to 
79,300,000  kronor  and  their  gold  reserves  from  7,200,000  to 
9,000,000  kronor.a  Of  the  21,400,000  kronor  increase  in 
notes  only  i  ,800,000  were  devoted  to  increasing  the  gold 
reserve,  the  proportion  of  which  to  the  notes  outstanding 
was,  in  fact,  decreased  in  the  interval  considered. 

It  appears,  therefore,  that  both  in  the  years  more  im- 
mediately preceding  the  final  arrangement  of  the  cen- 
tralization of  the  note  issues,  and  subsequently,  the  policy 
of  the  Riksbank  has  been  directed  toward  the  strengthen- 
ing of  the  metallic  reserves  on  which  the  preservation  of 
the  soundness  of  the  credit  of  the  country  rests  in  sub- 
stantial degree.  It  is  also  clear  that  the  monopoly  of  note 
issue  has  conferred  on  the  Central  Institution  greater 
power  to  attain  this  important  end. 

a  The  highest  figure  ever  reached  for  enskilda  bank  notes  outstanding 
was  83,600,000  kronor  at  the  end  of  March,  1901.  Their  gold  holdings  at 
that  date  amounted  to  9,500,000  kronor. 

90 


The     Swedish     Banking     System 

Of  the  other  principal  features  of  the  revision  of  the 
law  under  which  the  Riksbank  operates,  three  claim 
more  particular  notice:  (a)  The  safeguards  provided 
against  the  decrease  of  banking  facilities  as  a  consequence 
of  the  cessation  of  the  note-issuing  privileges  of  enskilda 
banks;  (b)  the  limitations  imposed  on  the  kinds  of  busi- 
ness which  the  Riksbank  may  undertake;  (c)  changes  in 
the  bank's  constitution. 

(a)  In  reference  to  the  first,  two  lines  of  action  were 
laid  down.  On  the  one  hand  the  number  of  branches  of 
the  Riksbank  was  required  to  be  so  increased  that  there 
might  be  one  in  each  of  the  24  districts  into  which  Sweden 
is  divided  for  local  government  purposes,  excepting  that 
immediately  adjacent  to  Stockholm,  for  which  the  head 
office  in  the  metropolis  may  suffice.  The  last  of  these 
was  opened  at  Upsala  in  the  course  of  the  year  1903.  An 
additional  branch,  making  24  in  all,  was  opened  in  1905. 

On  the  other  hand,  as  a  partial  compensation  for  the 
loss  of  note-issuing  privileges,  the  enskilda  banks  were 
assured  important  financial  support  from  the  Riksbank 
on  condition  that  they  maintained  all  the  offices  which 
were  in  operation  at  the  opening  of  the  year  1896.  Those 
banks  which  abandoned  their  own  issuing  privileges  in 
the  five  years'  interval  preceding  their  legal  cessation  on 
December  31,  1903  (as  has  been  seen  all  of  them  actually 
did  so),  were  entitled,  subject  to  the  condition  mentioned, 
to  the  grant  of  an  open  credit,  against  approved  security, 
at  2  per  cent  under  the  current  three  months'  discount 
rate  (provided  that  the  charge  should  not  fall  below  2  per 
cent)  and  without  the  usual  additional  commission.  The 
limit  of  the  credit  in  each  case  was  to  be  one-half  the 

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National    M.  on  et  ar  y     Commission 

amount  of  the  outstanding  notes  of  the  bank  in  question 
on  January  i,  1896.  In  addition,  such  banks  were  to  be 
entitled  to  rediscount  approved  bills  of  exchange  at  the 
Riksbank  at  a  rate  not  exceeding  two-thirds  of  the  rate 
charged  for  the  same  accommodation  to  others.  The 
limit  of  these  rediscounts  was  also  to  be  one-half  the 
outstanding  notes  on  January  i,  1896. 

From  January  i,  1904,  till  the  end  of  1908  these  privi- 
leges were  to  be  modified,  and  all  the  enskilda  banks  were 
to  be  entitled  to  rediscounting  privileges  on  the  above- 
named  terms  up  to  an  amount  equal  to  40  per  cent  of 
their  notes  outstanding  on  January  i,  1896.  This  advan- 
tage was  subject  to  the  condition  that  none  of  the  offices 
of  any  bank  thus  privileged,  which  were  open  on  January 
i,  1896,  should  be  closed  while  the  privilege  continued. 
Should  any  office  be  closed,  however,  the  Crown  was  to 
determine  in  what  degree,  if  at  all,  the  privilege  in  ques- 
tion should  be  continued,  the  importance  of  the  office  or 
offices  closed  forming  the  basis  of  such  a  decision. 

The  provision  made  for  the  period  of  transition  to  the 
monopolized  note  issue  was  subsequently  modified  by  a 
law  of  May  3,  1901,  which  substituted  the  following  for 
what  has  just  been  set  forth. 

The  time  for  abandoning  its  note  issues  having  been 
settled  by  arrangement  between  an  enskilda  bank  and 
the  Riksbank,  and  on  condition  that  none  of  the  offices 
open  on  January  i,  1896,  should  be  closed  during  the 
term  covered  by  the  arrangement,  unless  with  the  per- 
mission of  the  Crown  on  the  recommendation  of  the  man- 
agers of  the  Riksbank,  the  enskilda  bank  might  be  granted, 
against  approved  collateral,  loans  not  exceeding  65  per 

92 


The     Swedish     Banking     System 

cent  of  its  notes  outstanding  on  January  i,  1901,  and  an 
open  credit  not  exceeding  10  per  cent  of  the  same  amount. 
The  interest  charge  on  these  loans  and  advances  to  be  2 
per  cent  below  the  three  months'  discount  rate  of  the 
Riksbank,  though  not  in  any  case  lower  than  2  per  cent, 
and  the  usual  commission  on  the  open  credit  being  re- 
mitted. Further,  rediscounts  up  to  25  per  cent  of  the 
notes  outstanding  on  January  i,  1901,  might  be  granted 
at  a  rate  not  exceeding  two-thirds  of  that  otherwise 
charged  by  the  Riksbank. 

At  the  end  of  each  year,  beginning  with  1903,  the  amount 
of  the  maximum  limit  of  each  of  these  special  privileges 
is  decreased  by  one-eighth  of  its  original  amount,  so  that 
they  lapse  entirely  at  the  end  of  1910. 

For  banks  which  had  already  given  up  their  note  issues 
before  January  i,  1901  (there  was  one  such  bank),  the 
outstanding  circulation  of  January  i,  1896,  was  taken  as 
the  measure  of  the  advances  at  special  rates,  in  place  of 
the  circulation  of  January  i,  1901. 

The  change  effected  by  the  law  of  1901  was  one  distinctly 
advantageous  to  the  enskilda  banks.  It  gave  them  direct 
loans  in  place  of  open  credits,  thus  making  them  more 
effective  agents  in  putting  notes  of  the  central  insti- 
tution into  circulation  under  conditions  under  which  they 
had  previously  issued  their  own.  It  left  a  sufficient  open 
credit  to  serve  as  the  basis  of  drafts  on  the  Riksbank  in 
the  form  of  bank  post  bills,  and  substantial  rediscounting 
privileges  at  special  rates,  the  latter,  like  the  direct 
loans,  putting  notes  of  the  Riksbank  into  the  hands  of 
the  enskilda  banks.  Further,  the  substitution  of  Janu- 
ary i,  1901,  for  January  i,  1896,  as  the  date,  the  out- 

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National    Monetary     Commission 

standing  circulation  at  which  served  as  the  measure  of 
the  advances  at  special  rates,  practically  increased  the 
maximum  of  the  special  advances,  up  to  the  end  of  1903, 
by  about  40  per  cent.  The  substitution  of  a  period  of 
seven  years,  beginning  with  1904,  in  which  the  special  ad- 
vances gradually  decreased  from  being  about  three  and 
one-half  times  as  great  as  under  the  arrangement  of  1897 
to  final  disappearance,  for  a  five-year  term,  during  which 
the  maximum  of  the  special  advances  remained  fixed, 
was  also  a  great  addition  to  the  concession  made  to  the 
private  banks,  nearly  doubling  the  value  of  the  concession 
after  January  i,  1904. 

As  has  been  seen,  the  value  of  the  concession  was 
deemed  by  the  enskilda  banks  to  be  adequate  to  justify 
the  resignation  of  their  rights  earlier  than  the  date  fixed 
in  the  law  for  their  definite  cessation.  Banks  which 
became  entitled  to  the  privileges  above-named  did  not 
lose  them  if,  in  place  of  remaining  subject  to  the  law  of 
unlimited  liability,  they  became  ordinary  joint  stock 
banks,  or  were  merged  in  such  banks.  About  28  per  cent 
of  the  loans  and  advances  under  the  arrangement  were, 
at  the  end  of  1908,  made  to  such  joint  stock  banks,  five  of 
which  were  benefiting  by  the  special  terms,  as  representa- 
tives of  the  ten  enskilda  banks  which  have  ceased  to 
exist  as  banks  with  unlimited  liability. 

(b)  The  grant  of  the  monopoly  of  note  issue  to  the 
Riksbank  was  accompanied  by  a  stricter  regulation  of 
the  nature  of  the  business  conducted  by  the  central 
institution.  The  purpose  directly  in  view  was,  doubtless, 
the  more  effective  guarantee  of  the  solidity  and  realizability 
of  the  assets  of  the  note-issuing  authority.  Incidentally, 

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The     Swedish     Banking     System 

however,  it  resigned  to  other  institutions  certain  classes 
of  business,  and  though  the  former  note-issuing  banks 
have  necessarily  to  compete  for  this  business  with  other 
joint  stock  banks,  the  competition  of  the  privileged 
central  institution  is  removed. 

The  business  assigned  to  the  Riksbank  falls  under  the 
following  heads: 

1.  Purchase  and  sale  of  gold  and  silver. 

2.  Purchase  and  sale  of  bills  of  exchange,  drawn  on 
foreign  firms  or  persons,  and  with  a  currency  of  not  ex- 
ceeding six  months,  such  bills  being  payable  either  abroad 
or  in  Sweden.     Other  foreign  short-term  paper,  of    not 
exceeding  six  months'   currency,   may  also  be  acquired 
and  afterwards  disposed  of. 

3.  (a)   Purchase  and  sale  of  Swedish  bonds,  and  of  such 
obligations    of    foreign    governments    as    are    quoted    on 
foreign  stock  exchanges  and  are  readily  realizable. 

(b)  Taking   over,   by   arrangements   other   than   those 
for  purchase,  of  Swedish  government  bonds  and  readily 
realizable  obligations  of  foreign  governments. 

(c)  Acting  as  agents  in  effecting  the  purchase  and  sale 
of   Swedish   government   bonds   and   the   bonds   of    the 
general  mortgage  bank. 

4.  (a)   Discounting  accepted  inland  bills  of  exchange  pay- 
able within  six  months. 

(b)  Loans  against  Stock  Exchange  collateral  repayable 
within  six  months  (fixed  term)  or  on  not  exceeding  three 
months'  notice.  In  the  case  of  communal  authorities 
and  other  corporations  of  similar  status  the  note  of  the 
borrowing  corporation  may  be  accepted  as  sufficient 
security  without  other  collateral. 

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National    Monetary     Commission 

(c)  Loans  against  merchandise  in  a  public  warehouse, 
or  deposited    in  charge  of    an    independent  trustworthy 
person  who  has  bound  himself  to  hold  them  at  the  dis- 
position of  the  Riksbank,  such  loans  to  be  for  fixed  terms 
not  exceeding  six  months. 

(d)  Grant  of  credit  on  current  account  for  terms  not 
exceeding  twelve  months  against  collateral  consisting  of 
bonds,  shares,  or  a  lien  on  real  estate,  and  also  against 
personal  guarantees.     The  maximum  amount  of  the  funds 
of  the  bank  which  may  at  any  time  be  advanced  in  this 
way  shall  not  exceed  15,000,000  kronor  ($4,000,000,  30 
per  cent  of  the  bank's  capital) ,  not  including  in  this  sum 
the  credit  to  be  opened  for  the  national  debt  office,  the 
amount  of  which  is  fixed  not  to  exceed  1,500,000  kronor. 

(e)  On  similar  security  to  that  named  in  the  preceding 
paragraph  (d)  there  may  be  granted  loans  repayable  by 
installments  at  fixed  intervals.     The  aggregate  amount  of 
such  loans  was  fixed  in  the  law  of  1897  not  to  exceed  one- 
quarter  of  the  bank's  capital.     Five  years  later,  a  law  of 
May  14,  1902,  set  aside  the  sum  of  12,500,000  kronor  for 
such  loans  as  already  stated,  the  capital  remaining  un- 
changed and  the  fund  in  question  being  provided  from  the 
accumulated  surplus. 

5.  Deposits  for  fixed  terms,  or  repayable  on  demand,  to 
be  received  without  charge  and  subject  to  no  interest 
payment. 

Current  accounts  ("giro"  accounts)  to  be  kept  free  of 
interest  or  commission,  and  the  bank  to  make  the  neces- 
sary arrangements  in  connection  therewith  for  effecting 
the  business  of  the  clearing  house. 


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The     Swedish     Banking     System 

Firms  other  than  banking  firms  which  have  a  discount 
account  at  the  Riksbank  may  receive  interest  on  current 
account  balances. 

The  bank  is  required  to  receive  the  public  revenue 
and  to  make  payments  on  account  of  the  State  without 
charge. 

The  bank  is  required  to  accept  at  any  of  its  offices 
deposits  of  money  and  to  issue  sight  drafts  on  the  head 
office  in  Stockholm  for  the  amount  thus  deposited  without 
deduction  or  commission. 

Arrangements  for  the  receipt  of  sealed  deposits  are 
also  to  be  made  at  the  head  office,  and  at  branches  as  may 
be  determined  in  the  regulations  made  from  time  to  time. 

Foreign  loans  may  be  raised  and  accounts  opened  with 
reliable  foreign  banking  and  mercantile  houses  with  or 
without  interest. 

Beyond  the  business  included  under  the  above  heads, 
and  the  manufacture  of  paper  and  conduct  of  the  neces- 
sary printing,  the  Riksbank  is  prohibited  from  carrying 
on  any  other  class  of  business  whatever.  It  may  not 
own  real  estate  beyond  that  needed  for  its  offices,  paper 
manufactory,  and  printing  works.  To  protect  the  bank 
from  loss  it  may  buy  in  real  estate  on  which  it  has  a  lien 
when  such  property  is  sold  by  auction,  but  such  property 
must  be  sold  again  on  the  occurrence  of  a  suitable  oppor- 
tunity, and  in  any  case  when  the  sale  can  be  made  without 
loss. 

It  will  be  observed  that  the  Riksbank,  in  being  ex- 
cluded from  paying  interest  on  deposit  accounts,  leaves 
an  important  line  of  business  to  other  banks.  It  is  also 
not  under  the  same  pressure  .to  find  investments  for  its 
22150—10 7  97 


National    Monetary     Commission 

funds  when  the  attraction  of  interest  is  lacking  to  draw 
to  it  a  large  deposit  fund.  As  a  matter  of  fact,  as  already 
noted,  this  item  has  practically  disappeared  from  the 
balance  sheet  since  1897.  Current  accounts  with  interest 
on  the  balance  to  credit  of  the  client,  though  allowed 
with  certain  reserves  (see  above),  have,  in  fact,  not  been 
developed.  At  the  end  of  1908  the  resources  of  the 
Riksbank  included  capital  and  reserves  and  outstanding 
notes  amounting  to  three-fourths  of  the  whole.  Of  the 
remainder,  nearly  one- third  was  due  to  business  arrange- 
ments between  the  bank  and  the  national  debt  office 
and  the  balance  of  profits  held  for  account  of  the  State. 
The  element  corresponding  to  the  deposit  and  current 
accounts  of  American  banks  amounted  on  December  3 1 , 
1908,  to  some  $14,250,000  out  of  a  balance  sheet  total 
of  $97,000,000.  Of  these  deposits  about  90  per  cent 
were  public  deposits.  The  average  for  the  year  1908 
was  87  percent,  and  for  the  four  years  1905-1908  about 
85  per  cent.  In  1908  the  total  of  these  giro  accounts 
averaged  nearly  $11,500,000,  of  which  nearly  $10,000,000 
were  the  accounts  of  government  departments.  The 
remainder  is,  doubtless,  largely  affected  by  the  balances 
necessary  for  the  conduct  of  the  clearing.  The  Riksbank 
has  to  a  very  large  extent  ceased  to  derive  its  resources 
from  those  relations  with  the  public  on  which  other  banks 
are  dependent.  Its  note  issues  are  the  overwhelmingly 
most  important  debt  to  the  public.  At  the  end  of  1908 
the  seventeen  remaining  enskilda  banks  had  time  and 
notice  deposits  totaling  nearly  $123,000,000,  and  the  28 
"limited"  joint  stock  banks,  with  a  capital  exceeding 
1,000,000  kronor  ($268,000),  held  time  and  notice  deposits 

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The     Swedish     Banking     System 

to  a  total  of  $128,000,000.  Besides  the  deposits,  savings 
deposits  and  other  amounts  ordinarily  included  in  America 
under  the  terms  "deposits  and  current  account  bal- 
ances" amounted  to  $34,000,000  for  the  ensk'ilda  banks 
and  $70,000,000  for  the  limited  banks.  In  all,  therefore, 
these  other  banks  disposed  of  $365,000,000  of  funds 
placed  in  their  hands  by  the  public,  their  proprietors' 
funds  amounting  to  about  $148,000,000,  and  the  balance- 
sheet  totals  aggregating  $643,000,000. 

There  has  thus  developed  a  situation  in  which  the  Riks- 
bank  and  the  other  banks  operate  in  fields  almost  wholly 
distinct  so  far  as  the  sources  of  their  available  funds  are 
concerned.  In  the  matter  of  investments  the  dominant 
item  in  the  accounts  of  the  Riksbank  is  inland  bills  of 
exchange,  amounting  to  $45,000,000  at  the  end  of  1908.^ 
The  other  banks  to  which  reference  has  been  made  had, 
at  that  time,  rediscount  ed  inland  bills  to  nearly 
$38,000,000,  of  which  no  less  than  $35,000,000  had 
been  negotiated  with  the  Riksbank.  Bills  of  exchange 
formed  over  46  per  cent  of  the  assets  of  the  Riksbank, 
and  a  little  over  23  per  cent  of  those  of  the  other  banks. 
Loans  on  security  of  various  kinds,  on  the  other  hand, 
form  a  relatively  small  part  of  the  investments  of  the 
central  institution,  amounting  to  little  over  $10,000,000 
at  the  end  of  1908,  or  under  n  per  cent  of  the  assets, 
while  such  loans  amounted  to  no  less  than  $378,000,000 
in  the  accounts  of  the  other  banks,  or  not  far  short  of  60 
per  cent  of  their  total  assets.  The  proportion  of  loans 
on  real  estate  to  total  loans  on  security  was,  at  the  date 

alt  is  of  interest  to  note  that  the  average  currency  of  bills  discounted  by 
the  Riksbank  during  1908  has  been  calculated  at  about  fifty- three  days. 

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National    Monetary     Commission 

named,  but  little  over  one-sixth  for  the  Riksbank  and 
well  over  one-third  for  the  other  banks.  Stock-exchange 
securities  served  as  collateral  for  three-fifths  of  the  loans 
of  the  Riksbank  and  for  one-fifth  of  those  of  the  other 
banks.  As  already  stated,  the  cash  item  for  the  Riks- 
bank is  large,  gold  coin  and  bullion  and  other  coin  amount- 
ing to  23  per  cent  of  the  assets,  while  the  other  banks  held 
only  $13,500,000,  or  a  little  over  2  per  cent,  of  their  assets 
in  this  form,  almost  exclusively  in  notes  of  the  Riksbank 
and  in  balances  with  that  institution.  Other  items  should 
be  included,  such  as  checks  and  drafts  payable  at  sight 
or  within  a  short  time,  if  the  measure  of  the  readily  avail- 
able assets  were  required.  But  what  has  been  stated 
will  suffice  to  show  that  the  investments  of  the  Riksbank 
differ  from  those  of  the  other  banks,  notably  in  those 
features  which  are  related  to  the  ability  of  the  bank  to 
meet  demands  promptly.  In  confining  itself  to  such 
investments,  the  central  institution  goes  far  toward 
leaving  the  other  banks  in  possession  of  the  most  profitable 
part  of  the  field  of  operations,  thus  removing  what  might 
otherwise  have  been  a  reasonable  cause  of  objection  to 
the  grant  to  the  Riksbank  of  the  monopoly  of  note  issue. 
(c)  One  of  the  features  in  the  position  of  the  Riksbank 
which  had  been  made  the  subject  of  repeated  criticism,  and 
many  proposals  for  alteration,  was  the  fact  that  the  con- 
trol of  the  bank  rested  with  the  Parliament  alone,  and 
that  neither  in  the  Executive  Government  nor  in  any 
independent  body  was  there  any  power  to  influence 
the  discretionary  authority  of  the  Parliament.  In  truth, 
the  difficulty  presented  by  this  peculiar  feature  of  the 
constitution  was  perhaps  rather  apparent  than  real. 

100 


The     Swedish     Banking     System 

Nevertheless,  the  proposals  of  the  Committee  of  Inquiry 
of  1890  included  the  association  of  appointees  of  the 
Crown  with  those  of  the  Parliament  on  the  managing 
committee  of  the  bank  to  the  extent  of  one-third  of  the 
whole  number.  The  actual  change  made  fell  consider- 
ably short  of  that  proposed.  The  managing  committee, 
which  formerly  consisted  of  seven  parliamentary  repre- 
sentatives, has,  by  the  act  of  1897,  been  made  to  consist 
of  a  Crown- appointed  chairman  and  six  representatives 
of  the  Parliament.  To  the  extent  indicated  by  this 
change  the  Executive  Government  has  been  admitted  to 
a  share  in  the  control  over  the  bank.  Substitutes  are 
appointed  to  act  in  case  of  the  absence  or  incapacity 
from  sickness  or  other  cause  of  any  of  the  managing 
committee.  The  committee  of  seven  appoints  three 
(from  1873  to  1898,  two)  of  its  number  to  act  as  managing 
directors  of  the  bank,  each  having  charge  of  certain  de- 
partments of  its  operations.  The  jealousy  of  interfer- 
ence on  the  part  of  the  Crown  finds  an  expression  in  a 
section  of  the  1897  act  relating  to  occasions  when  a  rep- 
resentative of  the  executive  government  may  be  sent  to 
confer  with  the  managing  committee  of  the  bank.  The 
committee  is  forbidden  to  decide  the  question  in  hand 
so  long  as  the  Crown's  agent  is  present  with  them.  They 
are  thus  assured  opportunity  for  private  discussion  and 
independent  action. 

The  more  detailed  provisions  of  the  regulations  ap- 
proved by  the  Parliament  for  the  conduct  of  the  affairs  of 
the  bank  are  stated  in  Appendix  II  (B) .  They  include,  of 
course,  the  number  and  status  of  the  bank's  officers  at 
each  office,  and  the  scales  of  salaries  for  each  grade. 

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National    M  o  n  et  ar  y     Commission 

The  law  of  1897  provided  for  the  publication,  in  addi- 
tion to  the  detailed  annual  statement  of  the  bank's  affairs 
and  a  monthly  summary,  of  a  weekly  statement  in  which 
is  specified  the  amount  of  the  metallic  reserve  and  of  the 
gold  held  abroad  or  in  transit,  the  net  amount  of  foreign 
credits,  the  outstanding  circulation  of  notes,  and  the 
excess  of  legal  rights  of  issue  over  the  actual  circulation, 
as  also  the  amount  of  the  assets  which  are  legal  cover  for 
the  fiduciary  circulation. 


102 


CHAPTER  VI. 


JOINT-STOCK  BANKS. 

When  the  experiment  of  "district  banks"  (see  pp. 
43-49)  had  been  found  unsatisfactory,  in  the  early 
sixties,  the  question  of  the  establishment  of  independent 
joint-stock  banks  without  the  right  of  note  issue  came  once 
more  under  discussion,  and  both  the  Parliament  and  the  ex- 
ecutive government  showed  themselves  favorably  disposed 
toward  this  idea.  The  proposal  for  legislation,  which 
was  approved  in  1862-63  by  the  Parliament,  did  not, 
however,  eventuate  in  a  law  at  that  time,  and  the  joint- 
stock  banks  which  were  founded  before  1887  were  organ- 
ized under  the  general  act  of  October,  1848,  providing  for 
the  formation  of  joint-stock  companies  with  limited  lia- 
bility. The  importance  of  the  privilege  of  note  issue  was, 
with  the  lapse  of  time,  decreasing,  as  the  towns  grew  in 
size  and  the  means  of  communication  improved,  the  time 
during  which  notes  could  be  kept  in  circulation  being 
thereby  diminished  and  the  profits  of  note  issue  at  the 
same  time  decreased. 

The  earliest  of  the  joint-stock  banks  was  founded  in 
Gothenburg  in  1863,  with  a  forty-year  charter  and  a  capi- 
tal of  5,000,000  kronor  ($1,340,000),  of  which  20  per  cent 
was  to  be  called  up  at  the  start.  The  bank  was  opened 
for  business  on  April  i,  1864,  and  opened  a  branch  in 
Stockholm  in  August,  1865.  It  quickly  developed  an 

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National    M on  et ar y     Commission 

important  business,  and  became  the  agent  in  Stockholm 
for  numerous  banks  in  various  parts  of  the  country.  Its 
profits  were  substantial,  and  the  capital  was  increased 
from  time  to  time  as  the  magnitude  of  the  business  de- 
manded. It  has  long  been  one  of  the  largest  of  the 
Swedish  banks,  and  at  the  end  of  1908  its  balance-sheet 
total  exceeded  that  of  any  other  bank  than  the  Riksbank 
itself,  being  a  little  over  200,000,000  kronor  (say, 
$53,600,000).  The  capital  paid  up  then  stood  at 
22,000,000  kronor  (say  $5,900,000),  and  the  reserve  fund 
was  23,000,000  kronor,  capital  and  reserve  thus  amount- 
ing to  over  $12,000,000,  and  exceeding  that  of  any  other 
Swedish  bank  except  the  Riksbank  and  the  oldest  of  the 
former  note-issuing  banks,  the  bank  whose  •  balance-sheet 
total  stands  next  after  its  own.  Its  deposits  and  current- 
account  balances  totaled  $3 1 ,000,000,  its  loans  $30,000,000, 
and  its  discounts  nearly  $11,000,000. 

A  second  joint-stock  bank  with  limited  liability  was 
organized  in  1864,  a  third  in  1869,  two  in  1871,  two  in 
1872,  and  so  on.  Reference  has  been  made  above  to  the 
reorganization  of  unlimited  banks,  on  the  loss  of  their 
rights  of  note  issue,  into  banks  with  limited  liability,  or 
their  absorption  by  such  banks.  At  the  end  of  1908 
there  were  28  joint-stock  banks  with  limited  liability, 
having  each  a  capital  of  at  least  1,000,000  kronor 
($268,000).  Their  total  paid-up  capital  amounted  to 
210,968,000  kronor  (say,  $56,000,000),  the  reserves  to 
114,858,000  kronor  ($30,500,000).  The  deposit  and  cur- 
rent account  balances  aggregated  746,000,000  kronor 
($199,000,000);  the  loans  842,000,000  kronor  ($224,- 


104 


The     Swedish     Banking     System 

500,000) ;  and  the  discounted  bills,  inland  281,238,000  kro- 
nor,  foreign  9,888,000  kronor,  or  together  over  291,000,000 
kronor  ($77,500,000),  making  a  total  of  loans  and  dis- 
counts of  $302,000,000,  while  the  balance-sheet  totals 
aggregated  $370,000,000. 

Besides  these  larger  joint-stock  banks  there  were,  at 
the  end  of  1908,  twelve  others  having  a  capital  of  less  than 
1,000,000  kronor  each,  their  total  capital  and  reserves 
amounting  to  7,827,000  kronor  (say,  $2,100,000),  and 
their  other  resources  amounting  in  all  to  18,576,000 
kronor  (say,  $5,000,000).  These  are  exclusive  of  people's 
banks  (see  pp.  99-100). 

Legislation  touching  the  regulation  of  joint-stock  banks 
with  limited  liability  was  not  effected  till  1886,  the  law  of 
November  19  in  that  year  being  subsequently  replaced  by 
that  of  September  18,  1903,  forming  part  of  the  revised 
legislation  consequent  on  the  changed  situation  of  the 
unlimited  banks  in  regard  to  note  issue. 

The  law  of  1886  provided  for  the  grant  of  charters  to 
joint-stock  banks  with  limited  liability  for  a  period  of 
twenty  years  and  to  the  end  of  the  then  current  calendar 
year.  The  shareholders  were  required  to  be  Swedish  sub- 
jects and  to  be  at  least  twenty  in  number.  The  capital 
was  required  to  be  at  least  1,000,000  kronor,  with  the 
reservation  that  when  the  articles  of  association  provided 
for  a  business  of  limited  extent  the  capital  might  be  less 
than  this  limit,  though  in  no  case  less  than  200,000  kronor. 
Before  the  bank  might  commence  operations  at  least  20 
per  cent  of  the  subscribed  capital  was  required  to  be  paid 
up  and  security  given  for  the  payment  of  the  remainder. 


105 


National    Monetary    Commission 

Within  three  months  of  starting  business  a  further  20 
per  cent  was  required  to  be  paid  up,  and  the  remainder 
before  a  year  had  elapsed  from  the  opening. 

The  articles  of  association  might  not  provide  for  an 
increase  of  the  capital  to  more  than  double  the  minimum 
fixed  in  those  articles. 

Of  the  profits  at  least  15  per  cent  were  required  to  be 
applied  to  constituting  a  reserve  fund,  so  long  as  that 
fund  amounted  to  less  than  one-half  the  capital. 

The  register  of  shareholders  was  required  to  be  open  to 
examination,  by  anyone  desiring  to  inspect  it,  at  all  times 
during  which  the  bank  was  open  for  business. 

Joint-stock  banks  might  not  undertake  commercial 
business  other  than  dealing  in  gold  and  silver,  inland  and 
foreign  bills  of  exchange,  and  interest-bearing  paper. 

The  provision  as  to  owning  real  estate  was  the  same  as 
already  noted  in  the  case  of  the  Riksbank. 

Joint-stock  banks  might  not  acquire  their  own  shares  or 
accept  them  as  security  for  loans. 

They  were  expressly  forbidden  to  issue  anything  of  the 
nature  of  bank  notes.  Their  deposit  receipts  were  re- 
quired to  be  expressly  transferable  only  by  indorsement, 
and  to  bear  the  statement  that  they  were  not  for  use  as 
a  circulating  medium,  but  served  merely  as  a  record  of 
the  deposit. 

Renewal  of  the  bank's  charter  was  required  to  be  sought 
at  least  sixteen  months  before  it  expired,  and  the  general 
meeting  by  which  the  application  for  renewal  was  author- 
ized was  to  be  held  at  least  twenty  months  before  the 
expiration  of  the  then  current  charter. 


106 


The     Swedish     Banking     System 

To  the  above  provisions  of  the  1886  act  the  revised  law 
of  1903  made  few  alterations  other  than  giving  greater 
precision  to  details,  in  which  respect  the  later  legislation 
contrasts  somewhat  markedly  with  the  earlier. 

The  period  for  the  completion  of  the  payment  of  the 
subscribed  capital  was  shortened  from  a  year  to  eight 
months  after  the  commencement  of  business. 

The  provision  against  the  acquisition  by  a  bank  of  its 
own  shares  is  omitted,  though  that  against  their  accept- 
ance as  security  for  a  loan  is  retained. 

It  is  provided  that  in  case  a  deposit  receipt  be  trans- 
ferred from  one  owner  to  another  the  transfer  should  be 
notified  at  the  bank,  as  a  security  for  the  new  owner,  a 
notice  to  this  effect  replacing  that  required  by  the  earlier 
law  to  be  printed  on  the  receipts. 

Interest  on  savings-bank  deposits  may  not  be  paid  on 
more  than  3,000  kronor  ($804)  on  any  one  account. 

The  bank  may  not  bind  itself  to  repay  savings  deposits 
without  at  least  a  week's  notice,  though  the  notice  need 
not  be  exacted  in  actual  practice,  should  special  circum-/ 
stances  render  that  course  advisable. 

The  details  of  the  legislation,  as  to  the  process  of  forma- 
tion of  banking  companies,  their  inspection,  etc.,  need  not 
be  entered  upon  here.  In  the  main  they  are  such  as  might 
apply  to  companies  of  all  kinds,  though  the  need  to  secure 
the  trustworthiness  of  banking  institutions  may  call  for 
more  careful  prescriptions  of  the  law  in  their  case  than  in 
that  of  companies  in  general. 

The  Swedish  legislation  contains,  in  some  particulars, 
provisions  which  were  not  found  in  the  articles  of  associa- 
tion of  certain  of  the  earliest  of  the  joint-stock  banks. 

107 


National    Monetary     Commission 

In  these  cases,  where  the  articles  in  question  do  not  include 
the  provision  that  the  bank  shall  be  subject  to  all  future 
general  legislation  concerning  limited  companies  conduct- 
ing a  banking  business,  the  articles  of  association  will 
continue  to  regulate  such  companies  until  the  occasion 
for  a  renewal  of  the  charter  or  changes  in  the  articles  of 
association  afford  opportunity  to  bring  them  under  the 
provisions  of  the  legislation  here  referred  to. 

The  development  of  Swedish  banking  has  taken  place 
on  a  basis  independent  of  foreign  control  or  direction.  It 
may  be  of  interest  to  mention  that,  in  the  early  sixties, 
an  English  company,  the  English  and  Swedish  Bank,  with 
a  directorate  in  London,  entered  the  field,  with  the  view 
of  financing  Swedish  business  with  the  relatively  cheap 
capital  available  in  England.  Two  offices  were  opened 
in  Sweden  in  1864,  with  English  managers.  The  business 
done  involved  considerable  losses,  the  worst  of  which 
were  the  results  of  decisions  taken  by  the  London  board, 
the  members  of  that  body  not  being  fully  acquainted 
with  the  local  conditions  and  circumstances.  After  only 
five  or  six  years  of  activity,  it  was  found  necessary  to 
liquidate  the  bank's  affairs.  Though  the  period  was  one 
which  was,  as  has  been  shown  above,  not  wholly  unfavor- 
able to  the  development  of  joint-stock  banking  in  Sweden, 
the  native  institutions  beginning  to  arise  about  that  time, 
the  opportunities  were  not  such  as  to  favor  foreign  enter- 
prise. Capital  has  been  raised  abroad  for  application 
in  Sweden  under  the  direction  of  Swedish  banks,  but  the 
actual  development  of  banking  has  taken  place  under 
native  leadership  and  control. 


108 


CHAPTER  VII. 


PEOPLE'S  BANKS  AND  SAVINGS  BANKS. 

Some  brief  account  is  necessary  of  the  banks  which 
have  been  established  in  Sweden  on  the  model  of  the  well- 
known  Schulze  Delitzsch  institutions.  Some  of  these 
have  attained  considerable  importance,  and  a  number 
of  them  have  been  developed  into  joint-stock  banks. 

The  oldest  of  the  people's  banks  was  founded  in  1867. 
In  its  statutes  the  principle  of  mutuality  was  embodied, 
the  shareholders  providing  the  capital,  and,  in  the  main, 
the  deposits,  and  receiving  in  turn  loans  and  advances 
by  way  of  discounts.  They  were  jointly  and  severally 
liable  for  the  debts  of  the  bank,  as  in  the  enskilda  banks. 
The  people's  banks  were,  however,  intended  particularly  to 
meet  the  needs  of  borrowers  on  a  small  scale,  and  small 
loans  received  preference  over  large  ones. 

No  authorization  was  needed  for  the  establishment  of 
these  institutions,  either  from  the  King  or  from  other 
representatives  of  authority.  In  some  cases  the  local 
governor  refused  his  assent  to  the  proposed  statutes,  but 
in  at  least  five  instances,  in  one  of  which  the  refusal  had 
emanated  from  the  Crown  itself,  the  banks  were  never- 
theless able  to  proceed  with  their  proposed  business. 
Against  their  will  they  could  not  be  obliged  to  submit  to 
inspection  or  control  if  they  did  not  take  the  form  of  an 
ordinary  joint-stock  company. 

109 


National     Monetary     Commission 

The  new  banking  legislation  introduced  new  regulations 
forbidding  the  use  of  the  title  "bank"  to  any  institution 
not  organized  as  a  limited  or  unlimited  joint-stock  com- 
pany whose  articles  of  association  had  been  approved 
by  the  Crown.  These  regulations  came  into  operation 
with  the  opening  of  the  year  1904.  At  that  time  there 
were  28  people's  banks  which  were  not  joint  stock  com- 
panies, and  in  addition  to  the  head  offices  there  were  three 
branch  offices.  These  banks  had  32,419  savings  bank 
accounts,  with  a  total  standing  to  their  credit  of  15,797,462 
kronor  ($4,234,000)  and  other  deposits  of  rather  over 
half  this  amount.  Capital  and  reserves  amounted  to 
3,362,931  kronor  (about  $900,000)  and  the  total  resources 
to  about  28,000,000  kronor  ($7,500,000).  The  disposition 
of  these  funds  was  approximately  as  follows:  Cash  in 
hand  and  with  bankers,  7^  percent;  loans  on  real  estate 
collateral,  33^4  per  cent;  loans  on  personal  security  and 
discounted  bills,  each  about  23%  percent;  loans  on  other 
security,  10  per  cent;  stock  exchange  investments,  1^4  per 
cent. 

Until  the  end  of  1902  the  magnitude  of  the  affairs  of  these 
institutions  had  grown  from  year  to  year.  The  approach 
of  the  time  when  they  were  to  cease  to  have  the  right  to 
the  title  "bank"  produced  some  reduction  in  1903,  and 
since  that  time  their  numbers  and  importance  have  de- 
clined steadily.  The  old  name  was  allowed  to  be  used 
by  joint-stock  banks  under  the  new  laws,  whether  with 
limited  or  unlimited  liability.  Any  of  the  latter  class 
whose  capital  falls  below  1,000,000  kronor  is  called  a 
people's  bank  (Folkbank)  instead  of  bearing  the  title 


The     Swedish     Banking     System 

enskilda  bank,  which  designates  the  larger  banks  with 
unlimited  liability.  Two  banks  formerly  people's  banks 
have  taken  advantage  of  this  clause,  and  one  of  these 
survives  in  that  form.  Two  limited  liability  banking 
companies  with  a  capital  exceeding  1,000,000  kronor, 
and  26  whose  capital  does  not  reach  that  figure,  bore  the 
name  people's  bank  at  the  end  of  1908.  The  capital  of 
the  former  two  amounted  to  $1,500,000  together  and 
their  liabilities  to  the  public  to  $2,000,000,  while  the  26 
had  an  aggregate  capital  of  about  $2,750,000  and  liabili- 
ties to  the  public  about  $14,750,000. 

The  institutions  which  prefer  to  continue  to  operate 
without  submitting  their  statutes  for  approval  by  the 
Crown  now  bear  various  names,  of  which  the  chief  is 
"credit  association."  The  total  resources  of  the  18  which 
were  in  operation  at  the  end  of  1908  (4  of  which  had  been 
established  in  1904  and  1905)  amounted  to  10,027,861 
kronor  (say  $2,687,500),  of  which  972,701  kronor  ($260,700) 
were  capital  and  reserves  and  two-thirds  of  the  remainder 
savings  bank  deposits,  the  number  of  depositors  being 
15,107.  The  greatest  decrease  in  the  years  1904  to  1908 
had  been  in  the  number  of  large  deposits,  but  a  great 
decrease  had  occurred  all  along  the  line.  The  cash  in 
hand  and  with  bankers  had  fallen  in  the  five  years  from 
7X  to  5  per  cent,  and  the  small  holdings  of  bonds,  etc. ,  had 
become  yet  smaller,  while  discounted  bills  had  gained  in 
relative  importance  about  as  much  as  cash  and  invest- 
ments had  lost.  Loans  on  real  estate  collateral  had  fallen, 
while  those  on  personal  security  had  risen  in  relative  im- 
portance, these  items  having  nearly  exchanged  the  per- 


iii 


National    Monetary     Commission 

centages  represented  by  them  five  years  earlier.  There 
has  been  a  good  deal  of  fluctuation  in  the  distribution  of 
the  funds  in  the  five  years,  as  is  not  unnatural  with  so 
small  an  aggregate  amount,  affected  by  the  transfer  of 
some  of  the  institutions  to  the  group  of  joint  stock  banks. 

The  functions  of  the  people's  banks  are  now  being  per- 
formed by  the  joint-stock  institutions  subject  to  control 
rather  than  by  these  survivors  of  the  old  system,  especially 
by  the  smaller  of  the  joint-stock  banks,  and  by  the  sav- 
ings banks,  which  are  subject  to  regulation,  and  to  which 
attention  may  now  be  given. 

Savings  banks  proper  have  existed  in  Sweden  since 
1820,  when  the  first  of  them  was  opened  in  Gothenburg, 
to  be  followed  by  another  in  Stockholm  in  the  following 
year,  and  eight  others  in  various  centers  before  the  end  of 
1825.  At  the  end  of  1908  there  were  428  in  existence,  of 
which  27  were  not  more  than  five  years  old,  so  that  the 
system  is  steadily  being  extended  even  yet.  The  head 
offices  of  109  were  in  towns  and  the  remainder  in  the  lesser 
centers,  25  of  the  109  town  banks  having  branches  to  a 
total  number  of  374,  of  which  only  26  were  in  towns,  while 
15  of  the  others  possessed  in  all  32  branches.  There  were 
thus  135  offices  in  towns  and  699  in  minor  centers.  Many 
of  them  are  open  only  one  day  a  week,  or  even  less  fre- 
quently, one  being  open  only  once  every  second  month. 
In  many  cases  there  is  no  capital,  but  in  only  one  case  is 
there  no  reserve  fund.  As  the  statutory  regulations  of 
savings  banks  require  that  founders  or  their  assigns  shall 
not  receive  any  share  of  profits  made  by  the  institutions, 
the  capital  and  reserves  play  practically  the  same  r61e  in 


112 


The     Swedish     Banking     System 

the  economy  of  these  banks,  whichever  of  the  two  designa- 
tions be  used. 

The  law  under  which  the  savings  banks  now  operate 
was  passed  in  1892,  substituting  previous  legislation  of 
1875.  The  statutes  of  the  banks  require  approval  by  the 
Crown,  and  were  submitted  for  such  approval  after  the 
passing  of  the  law  of  1892,  though  they  have  not  been  re- 
quired to  be  again  approved  so  long  as  no  alteration  in 
them  is  made. 

The  savings  banks  receive  deposits  of  very  small 
amount,  and  in  most  cases  a  maximum  limit  to  the  sum 
on  which  interest  will  be  paid  is  fixed.  This  is  in  a  con-/; 
siderable  number  of  banks  as  low  as  2,000  kronor  ($536), 
but  the  most  usual  limit  is  5,000  kronor  ($1,340),  and 
10,000  kronor  ($2,680)  is  also  a  frequent  limit.  Higher 
limits  are  sometimes  found,  three  cases  occurring  where 
the  limit  is  50,000  kronor  ($13,400),  while  in  a  large  num- 
ber of  instances  the  managing  committee  has  power  to 
extend  the  ordinary  limit  in  special  cases.  The  number 
of  depositors  (or  rather  of  accounts)  had  reached  1,493,764 
at  the  end  of  1908,  and  had  increased  by  over  300,000 
in  the  ten  years  preceding  that  date.  The  amount  stand- 
ing to  the  credit  of  depositors  had  increased  even  more 
rapidly,  being  713,551,441  kronor  (about  $191,232,000)  at 
the  end  of  1908,  as  compared  with  402,923,356  kronor 
(about  $107,983,000)  at  the  end  of  1898.  The  increase 
in  the  ten  years  had  thus  been  77  per  cent.  To  this 
increase  the  interest  credited  had,  of  course,  contributed 
in  no  small  degree,  the  actual  excess  of  deposits  over 
withdrawals  in  the  ten  years  having  been  only  23.6  per 

22150 — 10 8  113 


National    Monetary     Commission 

cent  of  the  increase  of  depositors'  funds.  The  average 
rate  of  interest  actually  paid  in  each  of  the  last  ten  years 
was — 

Per  cent. 
i899__.  _   4.  19 

IQOO  -    4. S8 

.7  ™      *J 

1901 4-67 

1902 __.  -  4.44 

1903 -  4. 28 

1904 -  4.29 

1905  __  -  4-29 

1906 4.42 

1907 -  4.70 

1908 -  4-97 

The  average  rate  of  interest  paid  since  1860  has  been 
3.96  per  cent,  and  the  aggregate  amount  of  interest 
credited  in  that  time  has  been  over  70  per  cent  of  the 
amount  now  standing  to  the  credit  of  depositors. 

In  1908  the  most  usual  rate,  that  paid  by  325  of  the 
banks,  was  5  per  cent,  but  the  others  paid  rates  ranging 
from  4  per  cent  to  5^  per  cent,  and  6  per  cent  was  paid 
for  a  time  in  the  course  of  the  year  by  3  banks. 

In  1908  the  withdrawals  slightly  exceeded  the  deposits, 
a  comparatively  rare  occurrence,  the  deposits  having  been 
in  excess  in  each  year  since  1899.  The  proportion  of 
deposits  or  of  withdrawals  in  a  year  to  the  total  to  the 
credit  of  depositors  has  not  varied  much  from  the  ratio  of 
one  to  five  on  the  average. 

More  than  half  the  accounts  amounted  to  less  than  100 
kroner  ($26.80)  each,  and  only  14  per  cent  were  over 
1,000  kronor  ($268).  The  latter  were,  however,  respon- 
sible for  a  little  over  70  per  cent  of  the  total  amount  of 
deposits.  The  average  balance  to  the  credit  of  each 
account  at  the  end  of  1908  was  478  kronor  ($128). 


114 


The     Swedish     Banking     System 

The  funds  of  the  savings  banks  were  invested  to  the 
extent  of  79  per  cent  of  the  total  at  the  end  of  1908  in 
loans,  seven-tenths  of  these  in  amount,  or  over  55  per 
cent  of  the  funds,  being  in  loans  with  a  lien  on  real  estate 
as  security  and  17  per  cent  of  the  funds  in  loans  on  per- 
sonal security.  The  proportion  of  the  funds  employed  in 
loans  has  slowly  increased  for  some  years  past.  From  1890 
to  1900  it  decreased  from  about  76  per  cent  to  about  69 
per  cent,  as  compared  with  the  79  per  cent  of  1908.  As 
far  back  as  statistics  are  available  the  tendency  has  been 

• 

to  increase  the  percentage  of  funds  loaned  on  real-estate 
collateral.  In  addition  to  these  loans  to  private  persons, 
a  relatively  small  but  slowly  growing  percentage  (under 
4>^  percent  in  1908)  of  the  funds  was  loaned  to  municipal 
authorities  and  associations  of  various  kinds  on  their 
notes.  Stock -exchange  securities,  principally  bonds, 
were  held  to  the  value  of  nearly  10  per  cent  of  the  total 
funds.  The  proportion  of  funds  thus  invested  reached 
about  13^  percent  in  1898,  but  has  since  fallen  substan- 
tially and  continuously. 

The  law  of  1892  requires  each  savings  bank  to  hold  in 
readily  realizable  securities  a  sum  of  not  less  than  one- 
tenth  of  the  total  of  its  deposits.  Among  securities  which 
may  be  held  for  this  purpose,  however,  are  included  real- 
estate  mortgages  when  the  property  is  mortgaged  to  less 
than  half  its  valuation.  Thus  the  holding  of  bonds,  etc., 
just  referred  to,  need  not  correspond  to  the  legal  obliga- 
tion in  question. 

The  proportion  of  the  cash  in  hand  and  with  bankers 
to  the  total  funds  was  at  the  end  of  1908  as  low  as  3^ 
per  cent.  In  1906  it  was  4  per  cent,  in  1905  4^  Per  cent, 


National    Monetary     Commission 

and  in  1903  5  per  cent.  It  has  been  a  somewhat  fluc- 
tuating figure,  and  the  end  of  the  year  figure  may  pos- 
sibly not  represent  the  normal  position,  but  the  decrease 
in  the  last  five  years  is  very  noteworthy. 

It  is  perhaps  worth  noting  that  loans  on  personal 
security  are  relatively  much  more  important  in  the  case 
of  the  smaller  than  of  the  larger  savings  banks,  while  loans 
on  real-estate  collateral  are  more  important  in  the  larger 
banks.  These  latter,  too,  hold  their  funds  invested  to  a 
far  greater  extent  than  do  the  smaller  banks. 

The  total  funds  of  the  savings  banks  include,  besides 
the  funds  of  depositors,  capital  and  reserve  funds  and  a 
relatively  small  amount  of  other  funds.  The  capital  and 
reserve  funds  averaged  8.2  per  cent  of  the  depositors' 
funds  in  1908,  a  continuous  decrease  of  this  percentage 
from  9  per  cent  in  1895  to  8.1  per  cent  in  1906  having 
ceased  and  been  replaced  by  a  trifling  increase.  The 
proportion  is  much  greater  in  the  smallest  banks  than  in 
the  largest.  If  the  banks  be  divided  into  two  groups, 
according  as  their  capital  and  reserves  fall  short  of  10 
per  cent  of  depositors'  funds  or  not,  the  former  class 
included,  at  the  end  of  1908,  262  banks,  with  deposits 
of  549,700,000  kronor,  the  latter  166  banks,  with  deposits 
of  1 63, 900,000 kronor.  Of  the  former,  72,  with  399,600,000 
kronor  of  deposits,  had  their  head  offices  in  towns,  and  37 
of  the  latter,  with  deposits  amounting  to  107,800,000 
kronor. 

In  the  last  ten  years  the  aggregate  of  capital  and  re- 
serve funds  of  the  savings  banks  has  increased  rapidly, 
the  total  increase  having  been  66  per  cent,  but,  as  the 
deposits  have  increased  by  77  per  cent,  the  proportion 

116 


The     Swedish     Banking     System 

of  these  protective  funds  to  the  deposits  has  been  reduced, 
as  stated  above. 

The  cost  of  administration  averages  somewhat  under 
two-fifths  of  i  per  cent  per  annum  of  the  total  funds,  or 
i  per  cent  of  the  total  of  deposits  and  withdrawals  in 
the  year. 

A  post-office  savings  bank  was  established  in  1884, 
and  has  been  found  a  useful  supplement  to  the  other 
savings  banks,  particularly  in  the  more  sparsely  popu- 
lated districts.  There  has  been,  however,  an  excess  of 
withdrawals  over  deposits  in  each  of  the  years  since 
1899,  whether  due  to  the  greater  activity  of  other  bank- 
ing institutions  or  the  higher  interest  which,  in  times  of 
especially  active  trade,  these  other  banks  are  able  to 
offer.  The  turnover  is  somewhat  more  active  than  with 
the  ordinary  savings  banks.  The  total  balance  to  the 
credit  of  depositors  at  the  end  of  1908  was  only  about 
46,400,000  kroner  ($12,400,000),  and  the  average  account 
was  less  than  a  fifth  of  the  ordinary  savings-bank 
average.  The  recorded  numbers  as  well  as  aggregate 
amounts  of  deposits  and  withdrawals  year  by  year  show, 
as  might  be  expected,  that  the  average  amount  of  a 
deposit  is  much  less  than  that  of  a  withdrawal.  The 
average  deposit  has  in  the  last  five  years  amounted  to 
the  not  insignificant  sum  of  over  20  kroner  (say  $5.50), 
while  the  average  withdrawal  has  been  nearly  95  kronor 
(say  $25.50).  There  is  a  maximum  limit  fixed  for  de- 
posits by  any  depositor  in  the  post-office  savings  bank 
of  2,000  kronor  ($536). 

At  the  end  of  1908  the  number  of  accounts  in  post- 
office  savings  banks  in  Sweden  was  560,270,  and 

117 


National    Monetary     Commissio 


n 


the  number,  though  some  17,000  less  than  in  1902, 
has  decreased  less  rapidly  than  the  deposits.  The 
number  of  offices  at  which  business  is  done  steadily 
increases,  and  had  reached  a  total  of  3,180  at  the  end  of 
1908.  New  depositors  continue  to  be  secured  in  sub- 
stantial numbers.  Whether  the  extension  of  the  activi- 
ties of  other  institutions  has  for  its  result  the  transfer 
to  them  of  depositors  who  have  been  encouraged  to  save 
by  the  accessibility  of  the  facilities  offered  by  the  post- 
office  does  not  appear,  but  such  a  position  seems  not 
entirely  improbable.  The  average  rate  of  interest  paid 
to  depositors  has  been  barely  3.4  per  cent  during  the  ten 
years  1899-1908,  or  about  i  per  cent  less  than  was  paid 
by  the  ordinary  savings  banks.  The  investment  of  the 
funds  has  necessarily  been  restricted  to  the  less  remunera- 
tive forms,  one-fourth  of  the  total  being  lent  to  munici- 
palities on  their  notes  and  over  71  per  cent  invested  in 
bonds  at  the  end  of  1907.  The  lower  earning  power  has 
involved  a  lower  interest  to  depositors,  and  it  is  not  to 
be  wondered  at  that  they  transfer  their  accounts  to 
other  institutions  offering  more  attractive  returns  on 
entirely  satisfactory  security.  The  formalities  required 
for  withdrawals  are  also  said  to  discourage  the  use  of 
the  post-office  savings  bank. 

In  addition  to  the  facilities  provided  by  the  transac- 
tion of  savings-bank  business  at  over  3,000  post-offices 
and  branch  post-offices,  savings  stamps  are  sold  at  these 
and  at  over  2,000  other  places  where  there  have  been 
established  agencies  for  the  purpose.  The  number  of 
the  latter  is  being  rapidly  extended.  In  1907  savings 


118 


The     Swedish     Banking     System 

stamps  were  sold  to  the  number  of  1,322,937,  their  value 
being  132,293.70  kronor  ($35,455-) 

The   totals   of   savings-bank   accounts   in   the  various 
classes  of  institutions  at  the  end  of  1908  were  as  follows: 


Kronor. 

Dollars. 

In  joint-stock  banks: 
With  unlimited  liability 

77,  297,  233 

20,  715   658 

With  limited  liability         -.    .    

173  ,  705  ,  23  2 

46,  553  ,  002 

In  people's  banks  (formerly  so  called) 

i    614  871 

In  savings  banks 

713,551   441 

191  ,  231    786 

In  the  postal  savings  bank  _ 

46,  422  ,  570 

12  ,  441  ,  249 

The  savings  banks  proper  hold,  thus,  70  per  cent  of 
the  total,  and  that  total  amounts  to  just  over  $50  per 
head  of  the  entire  population. 

A  further  class  of  financial  institutions  to  which  a  very 
brief  reference  may  be  made  are  those  whose  aim  is  to 
provide  funds  for  the  sole  purpose  of  loans  on  real  estate 
mortgages.  The  earliest  of  such  institutions  in  Sweden 
was  founded  in  1836,  after  which  year  an  interval  of  nine 
years  elapsed  before  any  other  such  society  was  started. 

To  assist  these  mortgage  associations  in  the  provision 
of  the  funds  required  by  them  for  making  advances, 
there  was  established  in  1861  the  General  Mortgage  Bank, 
which  raised  money  by  the  issue  of  its  own  bonds,  and 
received  in  addition  a  loan  of  6,000,000  kronor  ($i  ,608,000) 
from  the  Riksbank,  assigning  suitable  security  for  the 
loan  to  the  bank.  The  State  provided  further  assistance 
by  handing  over  8,000,000  kronor  in  government  bonds 
to  the  General  Mortgage  Bank,  a  sum  increased  in  1890 
to  30,000,000  kronor. 


119 


National    Monetary     Commission 

Loans  are  made  at  4  per  cent  interest  and  an  additional 
one-half  per  cent  or  more  as  contribution  to  a  sinking  fund. 
Such  loans  may  amount  to  not  more  than  half  the  value 
of  the  land  serving  as  security.  Where  no  sinking  fund 
is  provided  for,  the  interest  is  the  same,  but  the  limit  ef 
the  loan  is  one-third  the  value  of  the  land. 

Besides  the  General  Mortgage  Bank  and  its  associated 
rural  mortgage  societies,  there  have  been  established 
mortgage  banks  for  lending  on  urban  property,  the  earliest 
of  these  dating  from  1865.  The  Mortgage  Security  Com- 
pany of  Stockholm,  is  included  among  the  joint-stock 
banks  dealt  with  in  the  preceding  chapter,  as  it  con- 
ducts, in  addition  to  the  business  of  bond  issue  and 
mortgage  loans,  a  general  banking  business. 

The  Stockholm  Stock  Exchange  quotes  the  bonds  of 
the  Swedish  General  Mortgage  Bank  at  prices  about 
equivalent  to  those  at  which  the  3.6  per  cent  bonds  of 
the  Swedish  Government  are  quoted. 

At  the  end  of  1907  the  General  Mortgage  Bank  had  sold 
bonds  to  the  value  of  339,000,000  kroner  ($90,850,000), 
of  which  some  60,000,000  kronor  ($16,000,000)  had  been 
redeemed.  The  mortgage  societies  had  made  advances 
to  their  members,  out  of  funds  received  from  the  Gen- 
eral Mortgage  Bank,  amounting  to  nearly  359,000,000 
kronor  ($96,000,000),  of  which  over  79,500,000  kronor 
($21,300,000)  had  been  repaid.  The  number  of  mem- 
bers was  then  74,630,  and  the  value  of  their  property, 
available  as  security  for  .advances,  842,000,000  kronor 
($225,600,000). 


1 20 


CHAPTER  VIII. 


THE  NEW  BANK  ACT  AND  THE  CRISIS  OF  1907. 

It  has  already  been  stated  that  the  new  banking  legis- 
lation, which  deprived  the  enskilda  banks  of  the  privilege 
of  issuing  their  own  notes,  by  no  means  checked  their 
development.  In  spite  of  the  absorption  of  some  of  them 
by  ordinary  joint-stock  banks,  and  the  reconstruction  of 
others  into  such  banks,  the  aggregate  figures  of  the  busi- 
ness of  those  which  retained  the  feature  of  unlimited  lia- 
bility showed  marked  expansion,  while  the  body  of  limited- 
liability  banks  grew,  both  by  the  addition  to  them  of  a 
substantial  part  of  the  former  note-issuing  banks,  and  by 
the  creation  of  new  banks  and  the  expansion  of  the  opera- 
tions of  those  already  in  existence. 

.  Both  the  preparatory  period  between  the  passing  of  the 
new  law  respecting  note  issues  and  the  actual  monopoliz- 
ing of  those  issues  by  the  Riksbank,  and  the  first  years  of 
the  new  system,  fell  within  the  period  of  increasing  business 
activity  throughout  the  western  world  which,  after  lasting 
for  over  a  decade,  was  interrupted  by  the  financial  troubles 
experienced  in  the  United  States  in  the  latter  part  of  1907, 
and  affecting  more  or  less  the  entire  business  world  as 
well  as  the  United  States.  The  expansion  was  shared 
in  by  Sweden,  and  the  check  to  business  may  be  supposed 
to  have  provided  a  test  of  the  new  monetary  arrange- 

121 


National    Monetary     Commission 

ments.  Though  disturbance  and  losses  were  not  avoided, 
the  test  may  be  said  to  have  given  results  of  a  satisfactory 
character.  This  outcome  of  the  strain  will  be  illustrated 
by  a  few  references  to  the  progress  of  events  during  the 
critical  period. 

Reference  may  first  be  made  to  the  stipulation  made 
between  the  Riksbank  and  the  former  note-issuing  banks, 
as  a  condition  of  the  provision  of  credit  facilities  on  favor- 
able terms  in  compensation  for  the  loss  of  note-issuing 
privileges.  It  was  that  the  offices  which  were  open  at  the 
beginning  of  1896  should  be  maintained.  The  27  note- 
issuing  enskilda  banks  in  existence  at  that  date  are  now 
represented  by  17  unlimited  banking  companies  and  5 
limited  banking  companies.  From  the  beginning  of  1 896  to 
the  end  of  the  nineteenth  century  the  number  of  branches 
of  enskilda  banks  increased  by  17,  though  one  such  bank 
became  a  limited-liability  banking  company  in  the  mean- 
time. The  limited  banks  of  all  sizes  increased  in  number 
from  28  to  40,  and  their  branches  from  19  to  57,  including 
the  gain  from  the  transference  from  the  ranks  of  the 
enskilda  banks  at  the  end  of  1898.  After  the  opening  of 
the  twentieth  century  the  rate  of  growth  was  much  accel- 
erated. At  that  time  there  remained  26  enskilda  banks. 
These  26  banks  had  99  branches  and  58  sub-branches. 
The  17  unlimited  banks  had,  at  the  end  of  1908,  94 
branches  and  87  sub-branches,  while  80  of  the  offices,  other 
than  head  offices,  of  limited-liability  banks  have  been 
acquired  by  the  transformation  or  absorption  of  former 
note-issuing  banks.  It  appears,  therefore,  that  the 
former  26  head  offices  and  157  other  offices  were  repre- 
sented at  the  end  of  1 908  by  2 1  head  offices  and  more  than 


The     Swedish     Banking     System 

261  other  offices,  for  the  four  limited -liability  banks 
which  resulted  from  the  reorganization  of  certain  of  the 
26  note-issuing  banks  have  not  failed  to  extend  their 
operations  in  the  years  since  the  reorganization,  and 
owned  23  other  offices  besides  those  referred  to  above  at 
the  end  of  1908.  The  note-issuing  bank  which  reorgan- 
ized as  a  limited-liability  company  at  the  end  of  1898 
had  six  offices,  all  of  which  were  maintained  under  the 
new  organization. 

At  the  end  of  1900  the  Riksbank  had  19  offices,  note- 
issuing  banks  183,  limited-liability  banks  96,  and  people's 
banks  32,  a  total  of  330  offices.  At  the  end  of  1908  the 
Riksbank  had  25  offices,  the  unlimited  banks  (including 
one  people's  bank)  199  offices,  limited-liability  banks 
with  capitals  of  at  least  1,000,000  kronor  304  offices,  and 
lesser  banks  51  offices,  or  a  total  of  579  offices.  There 
was  thus  an  increase  in  the  eight  years  of  249  offices,  to 
which  must  be  added  those  of  a  number  of  institutions 
representing  former  people's  banks,  and  a  couple  of  ex- 
change offices  of  larger  banks  not  included  in  the  above 
totals.  No  less  than  59  new  offices  were  opened  in  1907, 
and  43  in  1908,  so  that  the  development  seems  by  no 
means  at  an  end.  There  was  at  the  end  of  1908  a  bank 
office  for  every  9,300  inhabitants  on  the  average,  whereas 
at  the  end  of  1900  there  were  over  15,000  inhabitants  for 
each  bank  office. 

The  different  banks  quote  rates,  both  for  loans  and  for 
deposits,  that  are  very  nearly  the  same.  The  existence 
of  branches  of  more  than  one  bank  in  many  districts 
insures  this  advantage  of  competition.  The  Riksbank 's 
discount  rate  gives,  in  consequence,  a  measure  of  the 

123 


National    Monetary     Commission 

rates  current  everywhere,  though  there  remains  some 
variation  in  the  rates  returned  by  the  several  banks  in  the 
monthly  accounts.  These  fluctuations  may  perhaps  rep- 
resent, in  part  if  not  entirely,  differences  between  the 
classes  of  business  secured  by  the  different  institutions. 

In  general,  during  the  last  few  years,  the  interest  on 
savings  deposits,  and  on  deposits  at  three  months'  notice, 
has  been  i  per  cent  below  the  three  months'  discount 
rate  of  the  Riksbank.  Deposits  at  four  or  six  months' 
notice  receive  one-half  per  cent  more,  those  at  two 
months'  notice  one-half  per  cent  less,  at  one  month's 
notice  i  per  cent  less,  than  savings  deposits.  Deposits 
for  longer  terms  than  six  months  do  not,  as  is  the  custom 
in  some  countries,  receive  any  higher  interest  than  those 
for  six  months.  Current-account  balances  draw  interest 
at  i  per  cent  below  deposits  at  one  month's  notice  as  a 
rule.  With  discount  rates  between  5  and  7  per  cent 
the  above  relations  have  held  during  the  three  years 
1906  to  1908.  With  lower  discount  rates  the  scale  would 
naturally  be  modified  somewhat. 

Open  credits  are  charged  a  commission  of  from  one- 
half  to  i  per  cent,  and  interest  at  one-half  per  cent 
above  bank  rate,  as  a  rule.  Loans  on  real  estate  collateral 
are  commonly  charged  one-half  to  i  per  cent  above  the 
three  months'  discount  rate,  and  on  other  collateral 
one-half  per  cent  more  is  common,  though  lower  rates 
are  sometimes  quoted  than  on  real  estate  collateral. 
This  is  especially  the  case  with  the  Riksbank,  whose 
chief  loans  on  collateral  are  made  against  bond  security. 

The  average  bank  rate  of  discount  (on  three  months' 
bills)  and  the  mean  of  the  maximum  deposit  rates  of  one 

124 


The     Swedish     Banking     Syste 


m 


of  the   leading  banks  of  Stockholm  during  the  last  ten 
years  have  been  as  follows: 


Year. 

Maximum 
deposit  rate 
(per  cent). 

Three 
months'  dis- 
count rate 
(percent). 

1899 

4.  92 

5.89 

I  QOO                                                               

5-  oo 

5.87 

I9OI         _      _         

4-  79 

5-46 

4.  oo 

4.51 

1903                                         

4.  oo 

4-  SO 

I9O4        _      _         

4.  08 

4.61 

4.  17 

4-  73 

1906                                                                     '.  

4.63 

5.  20 

I9O7                          _-                 

5.  08 

6.  10 

I9O8 

5-21 

5   88 

The  bank  rate  thus  rose,  with  some  fluctuations,  from 
per  cent,  the  rate  throughout  1903,  to  5  per  cent, 
the  rate  prevailing  through  the  first  nine  months  of  1906. 
But  the  increasing  value  of  money  was  reflected  in  a  rise 
to  6  per  cent  by  the  middle  of  November,  1906,  and 
the  maintenance  of  that  rate  till  November  9,  1907, 
when  it  was  advanced  to  6%  per  cent.  From  December 
12,  1907,  till  January  29,  1908,  a  7  per  cent  rate  was 
established.  By  successive  reductions  of  one-half  per 
cent  on  the  last-named  date  and  on  April  3  and  June  6, 
1908,  and  again  on  January  7  and  February  19,  1909, 
the  4 3/2  per  cent  rate  was  again  reached. 

If  the  aggregates  for  all  the  banks  under  the  principal 
heads  of  the  monthly  accounts  be  examined,  it  is  found 
that  inland  bills  of  exchange  expanded  almost  without 
a  break  through  1906  and  1907,  though  in  the  last  two 
months  of  1907  the  expansion  was  but  trifling  in  com- 
parison with  the  37  per  cent  of  increase  in  the  preceding 
twenty-two  months.  In  1908,  however,  half  the  in- 

125 


National    Monetary     Commission 

crease  of  1907  was  lost,  and  the  decline  has  continued 
into  1909.  Loans  on  collateral  increased  by  21  per  cent 
in  the  twenty-two  months  ending  October,  1907,  and 
advances  on  credits  by  no  less  than  47  per  cent.  Taking 
both  together,  the  advance  was  29  per  cent.  Loans  and 
advances  have  both  increased  at  a  much  slower  rate 
during  1908,  one  class  of  loans,  those  on  shares  as  col- 
lateral, having  experienced  a  decline  to  about  the  level 
reached  at  the  beginning  of  1907.  Savings  deposits  have 
advanced  throughout  the  period  under  discussion,  though 
more  slowly  in  1908  than  in  the  two  preceding  years, 
and  of  time  and  notice  deposits  the  same  is  true.  So 
far  as  the  aggregates  of  the  bank  accounts  go,  the  features 
in  them  which  bear  witness  to  the  pressure,  besides  the 
decrease  of  inland  bills  discounted  and  of  loans  on  shares, 
are  a  small  decrease  in  bonds  held  in  the  last  month  of 
1907,  followed  by  some  further  small  decreases  in  1908, 
and  a  slight  increase  in  the  proportion  of  the  credits 
granted  which  were  drawn  in  1907  and  1908  as  com- 
pared with  1906  or  1905.  A  notable  increase  in  the 
(relatively  small)  amounts  standing  to  the  credit  of  cur- 
rent accounts  is  also  shown  in  1907,  especially  toward 
the  close  of  the  year,  and  still  further  increases  in  1908. 
The  gold  stock  of  the  Riksbank  lost  about  6,000,000 
kronor  out  of  a  total  of  about  76,000,000  kronor,  mainly 
in  the  weeks  ending  November  23,  November  30,  and  De- 
cember 28,  1907,  a  loss  which  only  began  to  be  made  good 
after  the  middle  of  July,  1908,  and  was  not  completely 
made  good  till  late  in  October.  In  the  first  week  of 
December,  1907,  the  foreign  government  bonds  held  by 
the  Riksbank  were  reduced  by  4,000,000  kronor,  and 

126 


The     Swedish     Banking     System 

though  a  large  part  of  these  were  temporarily  restored 
in  the  following  week,  the  accounts  show  that  from  the 
beginning  of  January,  1908,  until  the  end  of  May  the 
bonds  held  were  less  than  had  been  usual  by  the  amount 
named,  and  the  previous  situation  in  this  respect  was 
not  restored  till  the  middle  of  August,  1908. 

By  the  middle  of  November,  1907,  the  net  foreign  cred- 
its were  reduced  to  less  than  a  third  of  the  usual  amount. 
Throughout  the  year  they  had  been  much  less  than  at  cor- 
responding dates  in  1906,  partly  due  to  a  decrease  in  the 
credits  and  partly  to  an  increase  in  the  debit  side  of  the 
account,  and  it  is,  perhaps,  somewhat  remarkable  that, 
with  a  large  increase  in  the  net  balance  due  on  their  foreign 
transactions  by  the  banks  as  a  whole,  and  repeated  drains 
on  its  own  foreign  balances,  the  Riksbank  failed  to  impose 
the  check  of  a  higher  discount  rate  on  the  speculative 
spirit  manifested  in  the  business  circles  of  the  country. 
In  raising  its  rate  on  November  9  from  6  to  6  X  Per  cent, 
when  the  Bank  of  England  rate  had  been  advanced  to  7 
per  cent  two  days  previously,  and  in  maintaining  the  6>£ 
per  cent  rate  for  nearly  five  weeks  with  the  London  rate 
one-half  per  cent  higher  and  the  Berlin  rate  i  per  cent 
higher,  the  central  institution  would  appear  to  have  been 
open  to  the  criticism  which  has  been  leveled  at  its  policy 
during  this  period.  The  relation  of  lending  rates  in 
Sweden  and  borrowing  rates  abroad  was  such  that  the 
foreign  debit  balances  of  the  banks,  instead  of  being,  as  in 
1906  or  1908,  increased  toward  the  end  of  the  year,  had  to 
be  largely  decreased,  and  the  banks  had  to  turn  to  the 
central  institution  for  assistance  in  effecting  this  operation. 
Hence  the  export  of  gold,  the  sale  of  its  foreign  government 

127 


National    M on  et ar y     Commission 

bonds,  and  the  reduction  of  its  credit  balances  in  foreign 
centers. 

The  fact  that  a  new  Swedish  Government  loan  had  been 
arranged  in  France  to  the  amount  of  65,000,000  francs 
enabled  the  national  debt  office  to  come  to  the  assistance 
of  the  Riksbank.  For  fifteen  months  a  special  item  ap- 
pears in  the  Riksbank 's  monthly  statement  representing 
an  arrangement  with  the  national  debt  office,  the  amount 
for  which  the  Bank  became  indebted  to  the  national  debt 
office  being  over  $7,000,000  at  the  end  of  November,  over 
$i  i  ,000,000  at  the  end  of  December,  and  nearly  $13,000,000 
at  the  end  of  January,  1908,  when  the  highest  amount 
was  shown.  A  further  sum  of  about  $5,272,000  in  foreign 
exchange  was  arranged  for  in  February,  1908,  and  this 
item  appears  in  the  accounts  for  three  months,  represent- 
ing presumably  three  months'  drafts.  By  the  time  they 
ran  off,  the  strain  of  the  situation  was  considerably  eased. 

Aided,  then,  by  the  backing  of  the  treasury  (to  use  a 
term  more  familiar  than  national  debt  office)  the  Riksbank 
was  enabled  to  lend  assistance  to  borrowers  with  sound 
credit  and  satisfactory  security.  This  procedure  recalls 
in  some  degree  the  procedure  in  the  United  States  at 
about  the  same  time.  It  has  been  alleged  that  the  other 
banks  found  a  difficulty  in  securing  the  help  they  needed 
from  the  Riksbank.  The  monthly  accounts  hardly  lend 
support  to  this  view.  It  is  doubtless  true  that,  at  a  time 
of  pressure,  the  rules  requiring  careful  scrutiny  of  bills 
offered  for  discount  at  the  Riksbank  were  more  scrupu- 
lously observed  than  at  ordinary  times.  But  the  figures 
of  inland  bills  in  the  Riksbank's  portfolio,  of  its  loans  with 
bonds  as  collateral  security,  and  of  its  advances  on  open 

128 


.N 

OF 

ILIFQflHiJ 


The     Swedish     Banking     System 

credits  all  show  that  it  provided  in  substantially  increased 
sums  the  funds  called  for  by  those  who  depended  on  it, 
and  this  means  the  other  banks  in  the  main.  The  redis- 
counts of  the  joint-stock  banks  of  both  classes  have 
been  stated  in  the  monthly  accounts  since  the  beginning 
of  1907.  In  1907  over  92  per  cent,  in  1908  over  94  per 
cent,  of  the  rediscounts  of  the  other  banks  were  made 
with  the  Riksbank,  about  three-fourths  of  the  inland 
bills  held  by  that  institution  being  obtained  by  redis- 
counting.  From  September,  1907,  to  June,  1908,  the 
share  of  the  rediscounts  by  other  banks  which  was  effected 
with  the  Riksbank  was  higher  than  in  the  earlier  months 
of  1907  or  the  later  months  of  1908.  Naturally  the 
Riksbank  scrutinized  the  bills  offered  with  exceptional 
care  at  the  time  of  pressure,  but  this  is  no  proof  that  the 
facilities  usually  available  to  the  other  banks  were  un- 
reasonably reduced.  Had  such  scrutiny  not  been  made 
strict,  the  Riksbank  would  have  failed  in  its  duty.  It 
may  be  blamed  for  not  marking  the  discount  rate  up  to  a 
figure  higher  than  that  of  the  Imperial  Bank  of  Germany, 
but  unless  it  refused  advances  when  the  collateral  offered 
was  sound  it  should  not  be  accused  of  restricting  credit. 
The  strict  enforcement  of  the  rule  requiring  the  origin 
of  bills  to  be  taken  into  account  should  not  be  inter- 
preted in  this  sense.  Actually  it  would  appear  from 
the  monthly  accounts  that  about  20,000,000  kronor 
($5,360,000)  was  advanced,  beyond  the  usual  amounts, 
by  rediscounts,  and  a  sum  little  if  at  all  short  of  this  by 
advances  on  bonds  as  collateral,  of  which  about  half 
was  provided  when  the  increased  discounts  occurred,  in 
November,  and  the  remainder  early  in  1908,  when  also 

22150 — 10 9  129 


National    M  o  n  et  ar  y     Commission 

increased  sums  were  advanced  on  credits  opened.  By 
the  assistance  thus  rendered  the  other  banks  were  enabled 
before  the  middle  of  1908  to  bring  their  floating  debt  to 
foreign  bankers  to  about  the  same  dimensions  as  in  1906. 
As  by  this  time  the  discount  rates  in  other  countries  had 
fallen,  the  results  of  the  fixing  of  the  Swedish  rate  in- 
sufficiently high  in  comparison  with  the  German  and 
English  rates  had  been  effectively  dealt  with.  Whether 
a  higher  discount  rate  might  have  been  wiser  than  re- 
liance on  the  support  of  the  National  Treasury  is  a  ques- 
tion which  need  not  be  discussed  here  and  has  no  direct 
connection  with  the  matter  of  the  centralization  of  note 
issues,  other  than  this,  that  the  Riksbank  may  have 
endeavored  to  avoid  burdening  the  other  banks  with 
excessive  charges  for  accommodation,  partly  in  view  of 
the  relatively  recent  restriction  of  the  privileges  of  many 
of  those  other  banks.0  There  is  one  other  disturbance 
revealed  in  the  accounts,  namely,  the  comparatively  nar- 
row margin  of  reserve  note-issuing  powers  resulting  from 
the  strain  on  the  Riksbank.  This  reduction  of  the  mar- 
gin was  largely  the  direct  result  of  the  reduction  of  the 
credit  balances  abroad  of  the  Riksbank,  the  reduction  of 
the  gold  stock  also  contributing  substantially,  since  the 
note-issuing  powers  are  decreased  by  double  the  amount 
of  any  decrease  in  gold  in  the  bank.  At  the  time  of 
smallest  reserve  powers,  the  fact  that  a  sum  of  about 

«  For  a  considerable  part  of  each  of  the  years  1902-1906  the  rate  charged 
by  the  Riksbank  for  rediscounts  was  one-half  per  cent  below  the  regular 
discount  rate.  In  1907  no  such  reduction  of  the  rate  was  made.  In  1906 
the  lower  rate  was  so  charged  from  February  7  to  September  19,  and  in 
1908  from  May  22  to  June  5  and  from  July  3  to  the  end  of  the  year. 

&cf.  Ekonomisk  Tidskrift,  1908,  p.  172,  in  an  article  by  M.  Hamilton. 

130 


The     Swedish     Banking     System 

$750,000  was  on  the  way  abroad  further  decreased  the 
power  of  issue.  The  weekly  account  for  December  21, 
1907,  shows  a  margin  of  note-issuing  powers  of  only  6% 
per  cent,  the  margin  in  the  preceding  week  having  been 
about  12  per  cent,  while  in  the  following  week  it  was 
about  14  per  cent.  The  margin  ordinarily  runs  low  at 
the  end  of  December,  and  in  1906  fell  nearly  to  n  per 
cent.  By  the  last  day  of  1907  the  increase  of  foreign 
credit  balances  and  some  decrease  of  notes  in  circulation 
brought  the  margin  to  the  proportion  which  had  been 
reached  on  the  last  day  of  1905,  and  which  was  again 
reached  at  the  end  of  1908;  but  ten  days  earlier,  as 
stated  above,  the  margin,  was  abnormally  narrow.  It 
is  stated b  that  an  arrangement  was  effected  between 
the  Riksbank  and  some  of  the  important  banks  of  Stock- 
holm whereby  their  holding  of  notes  was  transferred 
each  afternoon  to  the  Riksbank,  so  as  not  to  be  included 
in  the  outstanding  circulation.  Such  an  arrangement 
may  have  contributed  to  the  restoration  of  a  relatively 
wide  margin  by  the  end  of  December,  but  it  does  not 
seem  necessary  to  suggest  that,  but  for  this,  the  legal 
issues  would  have  been  exceeded.  It  is  implied  that  the 
other  banks  hold  much  more  substantial  reserves  of 
notes  than  would  appear  necessary,  as  the  offices  involved 
are,  by  the  conditions  of  the  case,  conveniently  placed 
for  procuring  cash  from  the  Riksbank  without  delay  in 
case  of  need.  The  monthly  accounts  do  not  discrimi- 
nate between  notes  in  the  safe  and  deposits  at  the  Riks- 
bank, and  in  these  cases  a  deposit  balance  would  appear 
to  be  equally  available  with  notes  in  hand.  Were  this 


National    Monetary     Commission 

not  the  case,  no  one  would  imagine  that  the  banks  would 
let  the  notes  go  out  of  their  hands. 

On  the  whole,  the  figures  of  the  monthly  accounts  and 
the  weekly  figures  of  the  Riksbank  appear  to  support  the 
view  expressed  to  the  present  writer  by  bankers  in  Sweden 
that  no  serious  difficulty  was  experienced  by  the  banks  in 
providing  the  necessary  funds  to  aid  those  who  needed 
assistance  for  sound  business  purposes.  If  the  banks  were 
restrained  by  the  loss  of  note-issuing  rights  from  granting 
credit  for  more  speculative  purposes,  it  may  be  said  that 
this  restraint  was,  under  the  circumstances,  a  gain  and 
not  a  loss  to  the  community.  The  questionable  element 
is  whether  the  discount  rate  was  raised  sufficiently  early 
and  sufficiently  high,  and  the  centralization  of  note  issue 
would  hardly  operate  to  prevent  the  adoption  of  such 
restrictions  on  the  more  speculative  developments  of  busi- 
ness, but  rather  the  contrary. 

The  most  notable  evidences  of  trouble  are  perhaps 
those  found  in  the  growth  of  overdue  debts  to  the  banks 
and  in  the  application  of  large  sums  from  profits  in  writing 
down  assets.  The  overdue  debts  have  ordinarily  stood 
at  one-tenth  of  i  per  cent  of  the  balance-sheet  total,  or  even 
less.  In  1907  they  rose  to  over  one- third  of  i  per  cent  at 
the  end  of  the  year,  and  in  1908  to  somewhat  over  one-half 
of  i  per  cent,  taking  all  the  joint-stock  banks  together, 
limited  and  unlimited.  Such  an  increase  must  mean  a 
number  of  bad  debts,  and  the  sums  applied  to  writing 
down  assets  confirm  this  interpretation.  The  following 
table  gives  figures  for  the  last  five  years  from  all  the 
banks,  excluding  the  Riksbank: 


132 


The      Swedish     Banking     System 


[Expressed  in  thousands.] 


Year. 

Profits  of 
the  year. 

Expenses 
of  the 
year. 

Sums  applied  to  — 

Writing  down  assets 
from  — 

Reserves 
of  various 
kinds. 

Reserve 
fund. 

Revenue. 

$11,085 

12,  IIS 
14.333 
17,768 

18,801 

$3,608 
3,864 
4,  561 
5.179 
5-373 

$in 
4 
186 
2,867 
180 

$803 
783 
980 
2,792 

2,  721 

$i,  193 
1.234 
I,  146 
Ii36i 
1,994 

1905           _    

1906 

1907               __      

1908 

The  application  of  more  than  double  the  usual  propor- 
tion of  the  year's  net  profits  to  writing  down  assets,  and 
the  increased  sums  written  to  reserve  funds  or  held  in 
hand,  are  eloquent  witnesses  to  the  fact  that  the  banks 
have  suffered  substantial  losses.  How  far  the  large  sum 
so  applied  out  of  reserve  funds  in  1907  is  to  be  taken  as  a 
sign  of  large  losses  incurred,  and  how  far  it  was  merely  a 
preparation,  by  the  one  large  bank  which  was  responsible 
for  nearly  95  per  cent  of  the  total,  for  the  reconstruction 
which  followed  at  the  end  of  September,  1908,  when  it 
ceased  to  operate  under  unlimited  liability,  and  was  con- 
verted into  a  limited  liability  bank,  the  writer  is,  unfortu- 
nately, unable  to  state. 

So  much  does  appear  to  follow  from  the  examination  of 
the  course  of  events  as  illustrated  by  the  bank  accounts  of 
the  last  few  years,  namely,  that,  when  the  sharp  contrac- 
tion of  credit  throughout  the  world  at  the  close  of  1907  is 
taken  into  account,  there  is  no  evidence  that  the  changes 
in  the  Swedish  banking  law  have  contributed  to  render 
such  a  crisis  more  severe,  and  some  evidence  that  the 
opposite  has  rather  been  the  case. 


133 


SUPPLEMENTARY  CHAPTER. 


THE  BANKS  OF  DENMARK  AND  NORWAY. 

For  purposes  of  comparison  with  conditions  in  the 
neighboring  countries,  a  brief  summary  of  the  position 
in  Denmark  and  Norway  confined  to  the  note-issuing 
banks  follows.  In  both  cases  the  business  of  note  issue 
is,  and  has  always  been,  the  monopoly  of  a  single  privi- 
leged institution. 

(a)    DENMARK. 

The  note  circulation  in  Denmark  is  the  monopoly  of 
the  National  Bank,  a  joint-stock  institution  owned  by 
private  shareholders.  The  early  history  of  the  bank  was 
a  varied  one.  On  October  29,  1736,  a  charter  was  granted 
to  a  bank  with  a  share  capital  of  500,000  rigsdaler  current 
(roughly,  $430,000),  which  acquired,  among  other  privi- 
leges, that  of  issuing  its  notes  as  currency.  The  charter 
included  no  provision  ^as  to  the  proportion  of  notes  to  the 
metallic  reserve  of  the  bank,  and  the  freedom  of  issue 
was  quickly  abused,  so  that  in  1745  it  became  necessary 
to  grant  a  temporary  dispensation  from  the  obligation 
to  redeem  the  notes  on  presentation.  Though  the  notes 
were  only  irredeemable  at  that  time  for  a  period  of  eighteen 
months,  the  difficulties  which  had  led  to  this  measure  of 
relief  soon  recurred,  through  the  extension  of  loans  to 
the  Government,  to  trading  companies,  and  to  others  in 
excessive  amounts.  The  restriction  was  renewed  from 
October  6,  1757,  and  from  that  time  till  1845,  a  period  of 
eighty-eight  years,  the  bank  notes  remained  irredeemable. 

134 


The     Swedish     Banking     Syste 


m 


In  March,  1773,  the  bank  was  taken  over  by  the  State, 
and  the  issues  were  increased  so  largely  that  after  ten 
years  the  outstanding  amount  was  over  two  and  a  half 
times  as  great  as  at  the  date  of  the  conversion  to  a  state 
bank,  and  a  depreciation  of  10  to  15  per  cent  was  estab- 
lished. To  remedy  the  evil  so  far  as  the  Duchies  of 
Schleswig  and  Holstein  were  concerned,  there  was  estab- 
lished in  1788,  in  Altona,  a  "  speciesbank, "  which  issued 
redeemable  notes  and  replaced  the  depreciated  currency 
by  them.  In  1791  a  similar  measure  was  tried  for  Den- 
mark itself,  but  was  not  successful. 

During  the  war  period,  1807-1814,  the  Government 
had  to  rely  very  largely  on  the  issue  of  notes  for  meeting 
its  expenses,  and  the  circulation,  which  had  grown  from 
6,000,000  rigsdaler  in  1773  to  15,500,000  in  1783  and 
27,000,000  in  1807,  was  further  inflated  to  142,000,000 
at  the  end  of  1812.  The  relation  of  the  notes  to  coin 
was  correspondingly  affected.  The  parity  was  125 
dalers  current  equal  to  100  dalers  species.  The  rate  in 
1812  had  become  1,760  dalers  current  for  100  dalers 
species — that  is,  the  note  was  worth  little  more  in  coin 
than  7  cents  on  the  dollar.  This  situation  resulted  in  a 
declared  bankruptcy,  and  on  January  5,  1813,  there  was 
created  a  new  state  bank  with  the  name  of  Rigsbank  and 
a  new  basis  of  valuation  established  in  its  notes. 

The  new  bankdaler  was  the  nominal  equivalent  of 
half  a  daler  in  coin — that  is,  five-eighths  of  a  daler  cur- 
rent. The  notes  were,  however,  to  be  rated  at  6  dalers 
current  of  the  old  notes  for  i  daler  of  the  new,  which  re- 
duced them  to  five  forty-eighths  of  their  face  value,  or 
about  io*/2  cents  on  the  dollar,  assuming  the  new  notes 

135 


National    M on  et ar y     Commission 

to  be  worth  their  face  value,  and  less  than  this  in  reality, 
as  the  new  notes  were  not  at  par.  The  total  issues  of  the 
new  Rigsbank  were  to  be  27,000,000  dalers  for  redemption 
of  outstanding  notes  of  various  kinds,  4,000,000  to  pro- 
vide working  capital,  and  15,000,000  to  provide  funds 
for  the  treasury,  which  ceased  to  have  the  power  to 
issue  notes.  These  46,000,000  bankdalers  in  notes 
were  for  circulation  in  Norway  and  Denmark,  including 
Schleswig  and  Holstein.  In  the  latter,  however,  the 
currency  had  been  brought  into  a  satisfactory  condition 
by  means  of  the  bank  at  Altona,  and  it  was  necessary 
to  exclude  the  Duchies  from  the  field  of  circulation  of  the 
new  notes,  against  which  their  inhabitants  protested.  As 
the  result  of  the  conclusion  of  the  war  in  1814,  Norway 
was  separated  from  Denmark,  and  only  a  little  over 
7,000,000  dalers  of  notes,  already  in  circulation  there,  were 
taken  over  by  the  new  Kingdom.  Denmark  alone  was 
left  with  the  balance  of  nearly  39,000,000  dalers  in  notes, 
which  proved  to  be  far  beyond  the  needs  of  its  population 
and  trade,  and  in  1814,  in  place  of  the  ratio  of  2  to  i,  the 
proportion  of  value  between  the  species  daler  and  the 
daler  in  bank  notes  was  5^  or  6  to  i. 

The  new  bank  had  as  one  of  its  duties  to  reduce  the 
volume  of  the  note  circulation.  It  had  no  cash  reserve, 
and  only  its  profits  were  available  for  building  up  such 
a  fund  and  for  redeeming  notes  and  withdrawing  them 
from  circulation.  There  was  a  formal  basis  of  value 
for  the  notes  in  the  shape  of  a  lien  imposed  on  all  real 
estate,  corresponding  to  6  per  cent  of  the  value  of  the 
property.  This  took  the  form  of  a  rent  charge  of  6>£ 
per  cent  per  annum  on  the  amount  of  the  lien  in  each 

136 


The     Swedish     Banking     System 

case,  and  it  was  the  annual  rent  charge  rather  than  the 
nominal  capital  value  of  the  charge  which  was  of  im- 
portance to  the  bank.  It  amounted  in  all  to  about 
2,500,000  bankdalers,  and  was  to  be  applied  to  the  reduc- 
tion of  the  volume  of  outstanding  notes.  The  separation 
of  Norway  cut  off  13,000,000  from  the  nominal  46,000,000 
dalers  of  the  total  capital  value  of  the  rent  charge,  while 
the  notes  for  which  Norway  became  responsible  were,  as 
already  stated,  only  about  7,000,000  dalers.  The  owners  of 
property  protested  against  the  new  burden  placed  upon 
them,  and  by  an  ordinance  of  July  9,  1813,  the  rural  pro- 
prietors were  granted  reductions  of  taxation  amounting 
to  five-sixths  of  the  amount  of  the  new  rent  charge. 
The  result,  in  effect,  was  that  the  urban  proprietors  paid 
the  entire  charge  on  them,  and  that  the  rural  proprietors 
paid  only  one-sixth  of  the  amount  originally  charged, 
the  remainder  being  paid  as  a  subsidy  from  the  treas- 
ury. The  amount  of  this  state  subsidy  was  820,000 
bankdalers  annually  till  1830,  and  from  that  date  till 
1876,  328,000  bankdalers  (about  $176,000).  In  all,  these 
subsidies  of  the  treasury  amounted  to  about  27,500,000 
bankdalers  (say,  $14,750,000)  provided  for  the  redemption 
of  the  notes,  in  addition  to  the  annual  produce  of  the  rent 
charge  paid  by  the  proprietors  of  real  estate. 

At  the  time  of  the  establishment  of  the  Rigsbank,  a 
plan  for  its  transformation  into  a  private  bank  at  a  later 
date  was  approved.  The  intention  was  realized  by  the 
grant  of  a  charter,  to  date  from  August  i,  1818,  and  to 
run  for  ninety  years,  substituting  for  the  state-owned 
Rigsbank  the  privately  owned  National  Bank.  The  pro- 
prietors whose  property  had  been  subjected  to  an  annual 

137 


National    M  o  n  et  ar  y     Commission 

rent  charge  in  support  of  the  bank  were  transformed  into 
shareholders  in  the  new  institution,  being  credited  with 
shares  to  the  amount  of  the  lien  in  favor  of  the  bank 
established  as  related  above.  Those  whose  annual  con- 
tribution had  been  reduced  at  the  expense  of  the  treasury 
were  only  entitled  to  shares  in  proportion  to  the  reduced 
amount  really  borne  by  them — that  is,  one-sixth  of  the 
nominal  lien.  So  far  as  the  duchies  of  Schleswig  and 
Holstein  were  concerned,  provision  was  made  whereby 
the  payees  of  the  rent  charge  might  be  freed  from  the 
obligation  to  become  shareholders,  and  but  few  failed  to 
take  advantage  of  the  opportunity,  so  that  the  actual 
share  capital  was  barely  8,000,000  bankdalers  (about 
'$4,250,000).  As  there  were  no  dividends  for  share- 
holders till  after  1845,  the  advantage  of  owning  shares 
was  not  appreciated,  but  later  on,  after  a  beginning  of 
annual  distributions  was  made,  the  situation  was  so  al- 
tered that  many  took  advantage  of  a  provision  entitling 
them  to  pay  in  cash  such  amounts  as  might  be  required 
to  bring  up  the  shares  due  to  them  to  round  hundreds  of 
dalers.  In  this  way  there  was  made  a  gradual  addition 
of  about  5,500,000  dalers  (say,  $2,950,000)  to  the  share 
capital.  Finally,  in  1878,  its  amount  was  adjusted  to 
the  round  sum  of  27,000,000  kroner  (the  daler  having 
ceased  to  be  the  unit,  and  a  new  unit  of  half  the  value 
called  the  krone  having  taken  its  place),  or  $7,236,000. 

The  lien  on  real  estate  in  favor  of  the  bank  could  not 
insure  the  circulation  of  the  notes  at  their  full  nominal 
value.  The  reduction  of  the  amount  of  the  circulation 
effected  by  means  of  the  annual  revenue  assured  to  the 
bank  from  the  rent  charges  gradually  improved  the  situa- 

138 


The     Swedish     Banking     System 

tion.  The  notes  outstanding  in  1818,  when  the  National 
Bank  took  over  the  responsibility  for  them,  were  about 
31,000,000  dalers  ($16,600,000).  In  1820  the  bank 
effected  a  loan  of  6,000,000  dalers  ($3,216,000)  in  paper, 
and  the  notes  thus  brought  in  were  destroyed.  This 
brought  the  value  of  the  note  to  the  point  that  130  dalers 
in  paper  were  worth  the  silver  represented  by  100  dalers 
nominally.  By  October,  1838,  a  parity  between  the 
real  and  nominal  value  of  the  notes  was  reached,  though 
it  was  not  till  1845  that  it  was  deemed  safe  to  resume 
redemption.  The  circulation  had  been  reduced  to 
16,500,000  dalers  ($8,844,000)  before  this  step  could  be 
taken. 

With  resumption  of  cash  payments  there  were  estab- 
lished regulations  limiting  the  relation  of  the  circulation 
to  the  cash  reserve.  The  issue  might  not  exceed  twice 
the  cash  in  hand,  in  which  was  included  not  only  silver 
actually  in  the  possession  of  the  bank,  but  sight  drafts  on 
Hamburg  to  the  extent  of  not  more  than  one-fourth  of 
the  total  cash.  The  part  not  covered  by  cash  was  re- 
quired to  be  covered  by  easily  realizable  securities  to  an 
amount  exceeding  by  50  per  cent  the  notes  secured  by 
them. 

In  1847,  in  addition  to  these  regulations,  a  maximum 
limit  of  20,000,000  dalers  ($10,720,000)  was  fixed  for 
the  issues. 

The  growth  of  population  and  trade  permitted  this 
limit  to  be  raised  to  24,000,000  dalers  in  1854,  with  the 
provision  that,  of  the  4,000,000  added,  3,000,000  should 
be  covered  by  silver.  Thus  the  cash  cover  for  the  maxi- 
mum issue  of  24,000,000  dalers  became  10,500,000  dalers 

139 


National    Monetary     Commission 

in  silver  and  2,500,000  dalers  in  sight  drafts  on  Ham- 
burg, to  which  bonds,  bills  of  exchange,  and  the  like  to  an 
amount  of  16,500,000  were  to  be  added  as  cover  for  the 
remaining  1 1 ,000,000  dalers  of  the  issue. 

In  1859  the  maximum  limit  of  issue  was  abandoned  in 
favor  of  a  maximum  fiduciary  issue,  which  was  fixed  at 
the  same  amount  as  before,  namely,  13,500,000  dalers 
($7,236,000),  the  relaxation  of  the  former  rule  merely  ad- 
mitting of  the  addition  of  notes  to  any  required  amount 
fully  covered  by  silver  to  the  fiduciary  issue. 

After  the  establishment  of  the  gold  standard  in  1873, 
and  the  adoption  of  the  monetary  unit  of  a  krone  (of  the 
same  value  as  in  Sweden,  equal  to  one-half  the  bank  daler) , 
new  regulations  were  drawn  up  regarding  note  issue. 
They  were  as  follows: 

1.  The  bank  may  issue  notes  to  any  required  amount, 
provided  that  it  has  in  its  possession  cash  equal  to  the 
excess  of  the  issue  over   and   above   27,000,000  kroner 
and  not  less  than  three-eighths  of  the  entire  outstanding 
circulation. 

2.  The  part  of  the  issue  not  covered  by  cash  shall  be 
secured  by  good  and  safe  assets  in  the  proportion  of  150 
kroner  in  value  to  each  100  kroner  of  notes  so  secured. 
Such  assets  may  be  bills  of  exchange  both  inland  and  for- 
eign,  balances   repayable  on   demand   by   foreign  corre- 
spondents, stock-exchange  securities  taken  at  the  price  of 
the  day,  notes  of  borrowers  secured  by  collateral,   and 
mortgages  on  real  estate,  though  the  last  named  may  not 
be  held  to  a  total  amount  exceeding  6,000,000  kroner. 

3.  As  cash  may  be  reckoned   (a)   legal  current  coin  at 
its  face  value;  if  the  circulation  be  48,000,000  kroner  or 

140 


The     Swedish     Banking     System 

over,  at  least  12,000,000  kroner  shall  be  held  in  such  coin, 
and  if  less  than  48,000,000,  coin  equal  to  one-fourth  of 
the  issue;  (b) foreign  gold  coin  or  bullion,  taken  at  2,480 
kroner  per  kilogram  of  fine  gold ;  (c)  to  a  limited  amount, 
temporarily  fixed  at  one-third  of  the  whole,  silver  bars  and 
foreign  silver  coin  at  cost  price,  such  price  not  to  exceed 
the  proportion  to  gold  of  i  to  15.675. 

4.  The  bank  is  required  to  redeem  its  notes  in  gold  at 
their  face  value  on  presentation  at  its  head  office  and  to 
purchase  all  gold  bars  offered  at  the  rate  of  2,480  kroner 
per  kilogram  of  fine  gold,  less  one-fourth  per  cent  for  the 
expenses  of  minting. 

The  fiduciary  issue  was  increased  from  27,000,000  kroner 
to  30,000,000  kroner  by  an  ordinance  of  November  30, 
1877,  and  again  by  an  ordinance  of  December  27,  1897,  to 
33,000,000  kroner  on  condition  that  the  bank  should  issue 
notes  of  5  kroner  ($1.34),  its  previous  lowest  denomina- 
tion of  note  having  been  10  kroner.  The  5 -kroner  notes 
of  the  neighboring  countries  had  circulated  to  some 
extent  in  Denmark,  though  not  with  quite  the  same 
freedom  as  its  own  notes. 

From  1886  (ordinance  of  February  19)  the  net  balances 
due  to  the  National  Bank  by  the  Bank  of  Norway  and  the 
Swedish  Riksbank,  that  is,  the  balances  held  by  these 
banks  in  favor  of  the  Danish  bank  less  the  balances  held 
by  the  latter  to  their  credit,  have  been  reckoned  as  part  of 
the  cash  in  hand  by  the  National  Bank.  Similar  arrange- 
ments hold  in  Norway  and  Sweden.  It  is  found  conven- 
ient in  all  three  countries  to  effect  payments  by  means  of 
drafts  on  accounts  held  in  the  central  banks  in  the  other 
countries  rather  than  by  a  constant  flow  of  cash  to  and  fro. 

141 


National    Monetary     Commission 

In  view  of  the  intimate  commercial  relations  of  the 
three  Scandinavian  countries,  the  arrangement  appears 
a  highly  rational  one  which  encourages  such  a  course  by 
treating  the  net  balances  on  such  accounts  as  cash  in  hand. 

In  1894  a  further  step  of  a  similar  character  was  taken 
by  permitting  (ordinance  of  November  10,  1894)  the  bank 
to  reckon  as  cash  both  the  notes  of  the  Imperial  Bank  of 
Germany  and  the  treasury  notes  of  the  German  Empire 
held  by  its  branch  at  Flensburg,  and  the  deposit  (not  bear- 
ing interest)  at  the  Imperial  Bank  of  Germany  made  on  ac- 
count of  that  branch.  The  amount  of  such  German  notes 
and  deposits  which  might  be  reckoned  as  cash  was  limited 
to  6,000,000  kroner  in  1894,  and  extended  (by  ordinance 
of  June  25)  to  10,000,000  kroner  in  1897.  The  permis- 
sion was  accompanied  by  the  expression  of  the  expectation 
that  the  bank  would  not  use  this  means  of  extending  its 
issues  regularly,  but  hold  it  as  a  reserve  in  case  of  special 
necessity. 

These  extensions  of  the  interpretation  of  the  term 
"cash  in  hand"  permit  of  a  temporary  expansion  of  note 
issues  without  the  preliminary  actual  shipment  of  gold 
to  Copenhagen,  and  should  the  expansion  be  followed 
quickly  by  contraction,  the  movement  of  gold  may  be 
entirely  avoided. 

A  further  provision  for  elasticity  is  found  in  the  regula- 
tion that  the  National  Bank  is  only  required  to  present  a 
monthly  account  to  the  minister  of  justice  (acting  as  bank 
commissioner)  showing  that  the  conditions  of  the  law  are 
duly  fulfilled.  Should  it  appear  from  such  a  monthly 
account  that  the  relation  of  cash  to  notes  has  not  been 
maintained  as  prescribed  in  the  law,  the  bank  is  required 

142 


The     Swedish     Banking     System 

to  restore  the  legal  position  before  the  next  month's 
account  is  due.  It  has  thus  power  to  depart  from  the 
strict  letter  of  the  regulations  for  a  month  before  render- 
ing itself  liable  to  penalties.  This  power  was  not  utilized 
until  the  crisis  of  October,  1907.  In  the  account  for  the 
end  of  that  month  the  uncovered  issue,  which  had  been 
raised  to  38,000,000  kroner  in  1901,  was  shown  to  amount 
to  38,075,000  kroner,  the  cash  (inclusive  of  the  foreign 
balances  specified  above)  amounting  to  85,614,000  kroner, 
or  nearly  70  per  cent  of  the  outstanding  notes.  It  is  clear 
that  the  overstepping  of  the  strict  legal  limit  had  not 
resulted  in  a  dangerously  small  ratio  of  cash  to  notes  at 
that  date. 

The  expiration  of  the  charter  at  the  end  of  July,  1908, 
was  the  occasion  for  a  revision  both  of  the  constitution 
and  of  the  note-issuing  regulations  of  the  bank.  The  law 
of  July  12,  1907,  renewed  the  charter  for  twenty  years, 
and  modified  the  limits  of  note  issue  by  restoring  rules 
similar  to  the  earliest  above  mentioned  of  1845.  At  least 
half  the  circulation  is  required  to  be  covered  by  cash,  the 
remainder  with  good  and  sound  assets  of  specified  classes 
in  the  proportion  of  125  kroner  of  such  assets  to  100 
kroner  of  notes  so  secured.  The  other  regulations  re- 
mained unchanged,  except  that  an  elastic  limit  of  fidu- 
ciary issue  was  provided  by  the  regulation  that,  under 
exceptional  circumstances,  an  order  in  council  might  be 
granted  permitting  the  limit  to  be  exceeded  on  payment 
to  the  treasury  of  5  per  cent  per  annum  on  the  excess. 
The  new  rules  were  applied  by  anticipation  in  the  severe 
pressure  of  November,  1907,  an  order  in  council  of  Novem- 
ber 22  granting  permission  to  bring  them  into  force  at 


National    Monetary     Commission 

once.  The  November  account  showecl  a  fiduciary  issue 
of  40,780,000  kroner  and  a  cash  holding  of  81,571,000 
kroner. 

The  National  Bank  has  six  branches,  including  that  in 
Flensburg,  to  which  reference  has  already  been  made. 
In  the  last  ten  years  its  dividends  have  ranged  from  7  per 
cent  (in  five  of  the  years)  to  7^  per  cent  (in  two  years) 
and  8  per  cent  (in  each  of  the  three  years  ending  1 907-8) . 
Qf  the  profits  a  sum  of  750,000  kroner  ($201,000)  is,  by 
the  new  law,  required  to  be  paid  to  the  state  treasury, 
then  up  to  6  per  cent  to  the  shareholders,  and  of  the  bal- 
ance one-fourth  is  claimed  by  the  treasury.  The  profits 
for  1906-7  amounted  to  2,646,000  kroner  ($709,000);  for 
1907-8  to  3,955,000  kroner  ($1,060,000);  and  for  1908-9 
to  2,761,000  kroner  ($740,000).  For  1909,  therefore,  the 
share  of  the  treasury  was  about  $227,000.  The  reserve 
fund  is  required  to  be  30  per  cent  of  the  share  capital,  and 
to  this  figure  it  was  raised  in  September,  1908. 

The  National  Bank  is,  as  has  been  stated  above,  a 
joint  stock  company  in  private  ownership.  Its  manage- 
ment is  intrusted  to  5  managing  directors,  of  whom  2  are 
appointed  by  the  Government,  3  elected  by  the  board 
of  directors,  which  consists  of  15  representatives  of  the 
shareholders,  3  of  whom  complete  their  term  of  office 
in  each  year.  Previous  to  the  renewal  of  the  charter  in 
1908  the  managing  directors  had  for  a  quarter  of  a  cen- 
tury been  4  in  number  only,  and  i  of  these  only  was 
appointed  by  the  Crown.  The  board  consisted  then,  as 
now,  of  15  shareholders,  but  vacancies  were  filled  by 
cooptation.  The  new  law  requires  that  the  board  should 


144 


The     Swedish     Banking     System 

be  elected  by  the  annual  meeting  of  shareholders,  to  which 
meeting  a  report  on  the  year's  work  must  be  presented. 

The  previous  constitution  was  apparently  a  very 
oligarchical  one,  but  the  requirement  that  no  member 
of  the  board  should  serve  for  a  longer  period  than  five 
years  consecutively,  after  which  he  should  be  ineligible 
for  reelection  for  two  years,  may  have  had  some  effect 
in  keeping  the  board  in  touch  with  a  somewhat  larger 
number  of  shareholders  than  would  otherwise  have  been 
the  case.  Apart  from  the  appointment  of  two  managing 
directors,  forming  a  minority  of  the  managing  committee, 
and  a  general  supervision  sufficient  to  insure  the  observ- 
ance of  the  provisions  of  the  charter  and  the  law,  which 
is  intrusted  to  the  department  of  justice,  the  Executive 
Government  do  not  control  the  National  Bank.  Under 
the  revised  law  a  more  effective  control  by  the  share- 
holders may  be  expected  than  was  possible  under  the 
previous  system. 

At  the  end  of  1908,  the  resources  of  the  bank,  apart 
from  a  fund  administered  by  it  for  the  Government  in 
making  advances  to  communal  authorities  for  light  rail- 
ways, amounted  to  $45,900,000,  of  which  $9,406,800  was 
capital  and  reserve,  $33,468,000  notes  in  circulation 
(about  $12.50  per  head  of  the  population),  $1,495,000 
only  in  current  account  balances  and  $1,391,000  in  de- 
posits at  notice.  The  cash  in  hand  amounted  to  $18,663,000 
or  about  40  per  cent  of  the  total  resources.  The  bills  of 
exchange  amounted  to  $11,586,000,  of  which  about 
$500,000  represented  foreign  bills.  Collateral  loans 
amounted  to  $6,235,000,  rather  under  a  third  being  on 
real  estate  security,  two-thirds  on  stock  exchange  col- 

22150 — 10 10  145 


National    Monetary     Commission 

lateral.  The  holding  of  bonds  was  only  $893,000.  The 
item  "sundry  debtors"  was  relatively  large,  amounting 
to  rather  over  $6,500,000.  There  was  due  from  foreign 
correspondents  about  $2,500,000. 

Though  the  issue  of  bank  notes  is  a  monopoly  of  the 
National  Bank,  there  is  no  other  restriction  imposed  by 
the  law  on  banking  in  Denmark.  Yet  it  was  not  till 
1846  that  any  bank,  other  than  the  National  Bank  and 
its  two  branches  then  existing,  was  started,  and  not  till 
1845  that  a  banking  company  was  established  in  Copen- 
hagen. Since  1870,  however,  a  rapid  development  has 
taken  place,  and  this  has  proceeded  at  a  remarkable 
pace  since  1900. 

The  last  issue  of  the  Statistical  Year  Book  of  Denmark 
gives  particulars  of  133  banks,  in  addition  to  the  Rigs- 
bank.  These  133  banks  had  an  aggregate  share  capital 
of  somewhat  over  $53,000,000,  and  reserve  funds  amount- 
ing to  about  $i  1,500,000.  Their  total  deposits  amounted 
to  $183,500,000,  their  loans  to  $129,700,000,  and  their 
discounted  inland  bills  of  exchange  to  $47,000,000. 

In  February,  1908,  the  excessive  speculative  activity 
of  recent  years,  and  especially  the  excessive  support 
given  by  certain  banks  to  building  speculations,  brought 
about  a  severe  banking  crisis  in  Denmark.  To  alleviate 
in  some  degree  the  resulting  distress,  the  Government 
came  to  the  aid  of  the  banks,  establishing  an  advisory 
committee  and  providing  a  substantial  fund  to  guarantee 
the  creditors  of  the  insolvent  institutions.  The  diffi- 
culties of  the  situation  proved  greater  than  had  been 
anticipated,  but  they  do  not  throw  any  important  light 
on  the  operations  of  particular  kinds  of  banking  legisla- 

146 


The      Swedish     Banking     System 

tion,  rather,  perhaps,  illustrating  the  possibilities  of 
absence  of  restraint  from  the  side  of  the  law,  and  the 
difficulties  which  prevent  the  shareholders  of  large  com- 
panies from  controlling  effectively  those  in  whose  hands 
the  management  of  their  property  has  been  trusted.  It 
is  not  necessary,  for  the  purpose  of  the  present  report, 
to  attempt  any  discussion  of  the  causes  and  results  of 
these  recent  bank  disasters  in  Denmark. 

(6)    NORWAY. 

As  already  related,  the  Danish  Rigsbank,  established  in 
1813,  extended  its  activities  to  Norway  as  well  as  to  Den- 
mark. In  the  following  year  the  new  Government  of 
Norway  resolved  to  replace  the  branch  of  the  Danish  bank 
by  an  independent  Norwegian  Rigsbank,  whose  notes 
should  be  used  to  redeem  those  put  in  circulation  in  Nor- 
way by  the  Danish  bank.  Excessive  issues  by  this  new 
bank  quickly  brought  depreciation,  and  by  January  of 
1816  the  notes  were  worth  but  19  per  cent  of  their  face 
value.  The  situation  was  dealt  with  by  a  law  of  June  14, 
1816,  which  established  a  new  bank  under  the  name  of  the 
Bank  of  Norway,  with  its  headquarters  in  Trondhjem. 
The  funds  for  the  capital  of  the  new  bank  were  provided 
by  a  property  tax.  The  capital  was  2,000,000  species 
dalers  ($2,144,000),  and  a  further  tax  was  to  be  levied  of 
2,000,000  bank  dalers,  to  provide  for  the  retirement  of 
part  of  the  excessive  issues.  In  1818  the  remainder  of 
the  notes  were  redeemed  by  means  of  a  loan,  but  at 
three-sixteenths  of  their  face  value.  The  new  Bank  of 
Norway  received  the  grant  of  a  monopoly  of  note  issues, 


147 


National    Monetary     Commission 

with  the  obligation  to  arrange  for  the  current  redemp- 
tion of  notes  before  January  i,  1819.  It  was,  however, 
relieved  of  this  obligation  by  an  enactment  passed  in 
August,  1818. 

The  law  permitted  the  issue  of  notes  to  double  the 
amount  of  the  silver  held  by  the  bank,  but  the  use  of  this 
right  proved  to  yield  a  much  larger  circulation  than  was 
needed  or  could  be  maintained  without  depreciation.  It 
was  not  till  1842  that  the  notes  were  actually  redeemable. 
At  that  time  a  somewhat  involved  system  of  regulation  of 
the  amount  of  the  issues  according  to  the  cash  held  was 
established.  Of  the  total  cash  as  much  as  one- third  was 
permitted  to  be  held  abroad. 

An  increase  of  the  note  issue  by  2,500,000  kroner 
($670,000)  was  made  in  1863  on  terms  which  included 
the  issue  to  the  State  of  a  share  certificate  for  this 
amount,  thus  bringing  the  capital  to  12,500,000  kroner 

($3,35°>o°o)  - 

The  law  of  1892,  which  determined  the  present  organi- 
zation of  the  bank,  fixed  the  fiduciary  issue  at  24,000,000 
kroner  ($6,432,000).  Of  the  gold  held  against  the  rest, 
one-third  may  be  held  abroad,  that  is  to  say,  foreign 
credits  payable  on  demand  in  gold  may  be  treated  for  the 
purpose  of  note  backing  as  gold  to  the  amount  determined 
by  this  fraction.  In  addition,  a  sum  not  exceeding 
3,000,000  kroner  may  be  held  in  those  countries  with 
which  Norway  has  entered  into  currency  conventions,  so 
that  of  the  balances  held  to  the  credit  of  the  Bank  of 
Norway  in  the  Swedish  Riksbank  and  the  Danish  National 
Bank,  the  sum  of  3,000,000  kroner  may  be  accounted  as 
equivalent  to  cash  in  hand. 

148 


The      Swedish      Banking      System 

The  Bank  of  Norway  renders  its  accounts  weekly  0 
They  were  formerly  rendered  twice  in  the  month,  and  the 
rule  was  established  that  if  the  fiduciary  issue  should 
exceed  that  legally  permitted,  the  bank  should  be  called 
on  to  reestablish  the  legal  position  before  the  date  of  the 
next  following  account,  and  should  pay  at  the  rate  of 
6  per  cent  per  annum  on  the  excess  to  the  treasury  of  the 
State.  At  certain  times  of  the  year  the  reserve  of  issuing 
rights  has  been  rather  narrow  in  recent  years,  and  was  but 
little  over  2  per  cent  at  the  end  of  June,  1908,  the  total 
outstanding  issue  at  that  date  being  81,174,000  kroner 
($21,754,000),  of  which  47,951,000  kroner  ($12,851,000) 
were  covered  by  cash.  The  fiduciary  issue  having  been 
raised  to  35,000,000  kroner  ($9,380,000)  in  1900  the 
reserve  margin  was  only  1,777,000  kroner  ($477,000). 

The  division  of  the  profits  takes  place  as  follows : 

To  shareholders  up  to  6  per  cent;  one-tenth  of  the  bal- 
ance to  be  added  to  the  reserve  so  long  as  it  is  less  than 
5,000,000  kroner.  The  remainder  is  divided  equally 
between  the  State  and  the  shareholders  until  the  latter 
have  received  10  per  cent,  beyond  which  the  State  takes 
three-quarters  of  any  excess,  the  shareholders  one-quarter. 

The  head  office  was  transferred  to  Christiania  from  the 
beginning  of  1897,  the  office  at  Trondhjem  becoming  a 
branch.  At  present  there  are  1 2  branches  in  all. 

The  control  of  the  bank  remains  entirely  in  the  hands 
of  the  Government.  The  president  of  the  managing 
committee  of  five  is  appointed  by  the  Crown,  the  other 
members  by  the  Parliament,  which  also  elects  the  15  mem- 
bers of  the  board  of  directors.  Thus  the  private  share- 
holders have  no  influence  as  such  on  the  affairs'  of  the 


149 


National    Monetary     Commission 

bank.  The  managers  of  the  branches  are  also  appointed 
by  the  Parliament,  their  term  of  office  being  six  years.  The 
accounts  of  the  bank  are  required  to  be  submitted  to  a 
special  committee  of  the  Parliament  annually,  parlia- 
mentary supervision  replacing  that  of  a  shareholders' 
meeting. 

As  in  Denmark,  so  also  in  Norway,  banking  legislation 
has  been  limited  to  the  regulation  of  the  bank  possessing 
the  monopoly  of  note  issues.  Other  branches  of  banking 
are  free  to  all.  Nearly  a  hundred  banks  are  in  existence, 
but  few  of  which  have  a  capital  of  substantial  amount. 

The  following  tables  show  the  volume  of  the  note  circu- 
lation in  Sweden,  Norway,  and  Denmark,  and  the  average 
bank  rate  in  those  countries  in  each  of  the  years  1904  to 
1908: 


150 


The       Swedish       Banking       System 


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January  

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June  
January  

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June  
February  

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End  of— 

ecember.. 
inuary  

j 

inuary  

1 

ecember  .  _ 
inuary  

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Country. 

Sweden: 
Maximum  _ 
Minimum  .. 

Average  . 

Norway: 
Maximum  . 
Minimum-  . 

i 

Denmark: 
Maximum  . 
Minimum  __ 

Average  

151 


APPENDIX  I. 


OUTSTANDING    NOTE    ISSUES   OF    THE    BANKS    IN    SWEDEN, 

1899-1909. 

[Expressed  in  million  kroner.] 


1899- 

1900. 

End  of— 

Riks- 
bank. 

Other 
banks. 

Total. 

Riks- 
bank. 

Other 
banks. 

Total. 

January  _ 

60.4 

74.  2 

134.  6 

57-  9 

72.8 

130.  7 

February 

60   4 

75  •  9 

136.  3 

59.  6 

76.  9 

136.  5 

March 

65.3 

80.8 

146.  i 

64.  o 

81.2 

145.  2 

April  

61.  9 

76.  9 

138.8 

60.6 

79.  5 

140.  i 

May 

63.3 

72.  o 

135  .  3 

62.3 

75  •  7 

138.  o 

June..   _    _ 

72.  o 

76.  6 

148.6 

66.9 

80.  i 

147.0 

July  

64.1 

72.  5 

136.6 

59-  3 

75-  4 

134.  7 

August 

64   9 

73-  4 

138.  3 

60.  4 

76.  9 

137.3 

September 

71  •  5 

83.3 

154.  8 

68   9 

86.  i 

155.0 

October  

68.0 

78.6 

146.6 

66.2 

83.  2 

149-4 

November 

66   7 

77    i 

143.8 

64.  3 

82.  2 

146.  5 

December 

75  •  2 

80.  o 

155.2 

72.  o 

82.4 

154.  4 

Maximum 

75  •  2 

83.3 

155  •  2 

72.0 

86.  i 

155  •  O 

Minimum  

60.4 

72.  o 

134.  6 

57-9 

72.8 

130.  7 

Average 

66   i 

76   8 

142.9 

63.  5 

79-  4 

142.9 

Variation  

14.8 

1  1  .  3 

20.  6 

14.  i 

13.  3 

24.  3 

1901. 

>  1902. 

End  of  — 

Riks- 
bank. 

Other 
banks. 

Total. 

Riks- 
bank. 

Other 
banks. 

Total. 

January 

59  6 

74   7 

134.  3 

85   8 

49.  o 

134.  8 

February  

56.  9 

79.  o 

135.  9 

85.3 

50.  6 

135  .  9 

March 

65    5 

83  6 

149   i 

95-  3 

52.5 

147   8 

April    .                   ... 

61.  i 

79.  3 

140.  4 

90.  o 

48.5 

138.5 

May 

63    7 

75    9 

139  6 

go    5 

45-  7 

136    2 

69.8 

79-  4 

149-  2 

101.  3 

47-0 

148.3 

153 


National    M  o  n  et  ar  y     Commission 


Outstanding  note  issues,  1599-7909 — Continued. 


1901. 

1902. 

End  of— 

Riks- 
bank. 

Other 
banks. 

Total. 

Riks- 
bank. 

Other 
banks. 

Total. 

July  

72.0 

o  72.  3 

144.  3 

98.8 

39-  7 

138.  5 

August 

75    o 

68.  6 

143-6 

104.  o 

36.  3 

140.  3 

September  

88.0 

71.3 

159.  3 

121.4 

35  .  i 

156.  5 

October 

90  8 

61    i 

151.9 

121     O 

32   o 

153.0 

November     

89.  4 

57.0 

146.  4 

I  21  .  2 

28.6 

149.  8 

December 

55    6 

156   6 

2"5     2 
5 

162   6 

Maximum  

IOI.  O 

83.6 

156.6 

137.  4 

52.5 

162.6 

Minimum 

56.9 

55-  6 

134.3 

85.3 

25  .  2 

134.  8 

Average   

74-  4 

71.5 

145-9 

104.  3 

40.  9 

145-2 

Variation 

28.  o 

22.3 

52.1 

27.3 

27.8 

1903- 

1904. 

End  of  — 

Riks- 
bank. 

Other 
banks. 

Total. 

Riks- 
bank. 

Other 
banks. 

Total. 

January  

122.  6 

20.  9 

143.  5 

145.  6 

4-  i 

149-  7 

February 

1  24.  3 

20.  5 

144.  8 

147.4 

3-6 

151.0 

March 

136.8 

20.  o 

156.8 

163.  i 

3-  4 

166.5 

April.  

131.  4 

18.  i 

149-  5 

152.  5 

3-  2 

155-  7 

May 

133.  3 

16.  4 

149.  7 

150.  7 

3  •  ° 

153.  7 

June                          . 

143-6 

15  •  2 

158.8 

163.8 

2.  9 

166.7 

July    

135  .  7 

12.8 

148.  5 

151.  o 

2.8 

153-8 

August 

142.  9 

9.  2 

152.1 

150.  7 

2-  7 

153.  4 

September 

160.  6 

7  •  5 

168.  i 

171.4 

2.6 

174.  o 

October    

155.  8 

6.2 

162.  o 

161.  3 

2.6 

163.  9 

November 

IS4.  2 

5  •  3 

159.  5 

156.  o 

2.  5 

158-  5 

December             

165.8 

4.6 

170.  4 

170.  3 

2.  4 

172.7 

Maximum 

165.  8 

20.  9 

170.  4 

171.4 

4-  i 

174.  o 

Minimum  

122.  6 

4.6 

143-5 

145.  6 

2.  4 

149-  6 

Average 

142.  2 

13.1 

155.3 

157.0 

3-  o 

160.  o 

Variation     

43  •  2 

16.3 

26.  9 

25.8 

i-  7 

24.  4 

a  During  the  two  years  following  the  middle  of  1901  there  were  concluded  at  intervals 
operative  arrangements  between  the  Bank  of  Sweden  and  other  note-issuing  banks,  in 
virtue  of  which  the  latter  ceased  to  issue  their  own  notes.  The  effect  of  the  first  of 
these  is  seen  in  the  July  return  of  1901,  and  the  others,  as  they  came  into  force,  con- 
tributed to  the  rapid  reduction  of  outstanding  issues  of  enskilda  bank  notes.  From 
January  i,  1904,  the  Bank  of  Sweden  alone  has  had  the  right  of  issue. 


154 


The     Swedish     Banking     System 


Outstanding  note  issues,  1899-1909 — Continued. 


1905. 

1906. 

End  of— 

Riks- 
bank. 

Other 
banks. 

Total. 

Riks- 
bank. 

Other 
banks. 

Total. 

January 

146   5 

2     2 

148   7 

155.4 

i   6 

February  _                

149-7 

2.  I 

151.  8 

160.  i 

i.  6 

161.7 

March 

2     I 

167   5 

178   7 

i   6 

180   3 

April               _        _   __ 

iSS-2 

2.  I 

157.3 

167.7 

(a) 

167    7 

May  

153.4 

2.  O 

155.  4 

168.3 

(a) 

168.3 

June 

2.  O 

173.  i 

186.  5 

(0) 

186   5 

July              

154.  6 

1  .  9 

156.  5 

166.  4 

(a) 

166   4 

August  

157.  7 

I.  9 

159.  6 

173-5 

(a) 

1  73  .  5 

September 

183    2 

i.  9 

185.1 

198.  3 

(0) 

198   3 

October 

171.7 

i.  7 

173.  4 

188.3 

(0) 

188.3 

November  

165  .  4 

i.  7 

167.  I 

180.  9 

(0) 

180.  9 

December 

183    7 

i  .  7 

185.4 

2OI  .  9 

(0) 

201    9 

Maximum 

183    7 

2.  2 

185.  4 

201  .  9 

1.6 

201    9 

Minimum      __         _    __    _ 

146.  5 

i  .  7 

148.  7 

155  .  4 

1.6 

157   o 

Average  

163  .  i 

i.  9 

165.  o 

177.  2 

o.  4 

177.6 

Variation 

37    2 

o.  5 

36.  7 

46.  5 

o.  o 

44   9 

Riksbank. 

1907. 

1908. 

1909- 

January  

173.  4 

1  73  •  i 

168.  7 

February 

176-  5 

174.  i 

March        

196.8 

189.8 

192.  8 

April.. 

183.  i 

174.  9 

179.  7 

May 

178.  9 

176.  I 

181   i 

June    _      _    

194.  4 

188.8 

193.  8 

July 

178     2 

174   4 

178  8 

August 

183.  9 

178.  9 

172  7 

September                 __    _   ________      __ 

207.  6 

196.  9 

196.  o 

October  

195.  6 

191.  o 

190.  6 

November 

189.6 

184  5 

184.  7 

December     _    _   _        _        __.._.__..____  

190.  i 

201  .  5 

201.  9 

Maximum  ___   _      

207.  6 

201  .  5 

201.  9 

Minimum  

173.  4 

173.  I 

168.7 

Average 

187.3 

183.  7 

184.8 

Variation  _   . 

34-  2 

28.4 

33.  2 

a  Notes  no  longer  current. 


155 


APPENDIX  II. 

A.  LAW  FOR  THE  BANK  OF   SWEDEN  (RIKSBANK). 

May  12,  1897. 

CHAPTER  I. — Of  the  bank's  capital. 

§i.  The  Swedish  Riksbank,  which  is  placed  under  the 
guaranty  of  the  Parliament,  shall  conduct  the  business 
of  banking  in  accordance  with  this  law. 

§2.  The  Riksbank's  capital,  exclusive  of  its  real  estate, 
office  equipment,  and  its  collection  of  coins  and  medals,0 
shall  be  50,000,000  kronor. 

CHAPTER  II. — Of  note-issuing  rights. 

§3.  The  Riksbank,  in  accordance  with  a  special  law 
regarding  its  rights  of  note  issue  and  the  legal  tribunal  to 
which  it  is  subject,  has  the  sole  right  of  issuing  bank  notes. 

These  notes,  in  accordance  with  §72  of  the  Constitution, 
are  legal  tender  throughout  the  Kingdom  and  shall  be 
redeemed  by  the  Riksbank,  in  accordance  with  the  wording 
upon  them,  whenever  redemption  is  demanded. 

The  redemption  of  the  notes  of  the  Riksbank  shall  be 
effected  at  the  head  office  of  the  bank. 

§4.  The  notes  which  are  issued  by  the  Riksbank  shall 
bear  the  promise  of  the  Riksbank  to  redeem  them  on 
demand  in  gold  coin,  in  accordance  with  the  terms  of  the 

a  By  the  law  of  May  14,  1902,  there  were  inserted  at  this  point  the  words 
"and  the  fund  for  installment  loans  referred  to  in  §13,  the  administration 
of  which  is  assigned  to  the  Riksbank." 

156 


The     Swedish     Banking     System 

law  of  May  30,  1873,  respecting  the  coinage  of  the 
Kingdom. 

§5.  The  notes  of  the  Riksbank  shall  be  of  the  following 
denominations,  and  none  other,  namely,  5,  10,  50,  100, 
and  1,000  kronor. 

§6.  The  Riksbank  has  the  right  to  issue  notes  to  the 
amount  which  is  covered  by  the  following  items  of  its 
cash  assets:  (a)  The  metallic  reserve,  as  defined  in  §8;  (6) 
gold  coin  or  bullion  on  deposit  abroad  or  in  transit  there- 
from and  covered  by  a  marine  insurance  policy;  (c)  the 
amount  of  its  funds  in  current  account  with  foreign 
banking  establishments  or  mercantile  houses. a 

§7.  In  addition  to  the  amount  determined  in  accordance 
with  the  terms  of  §6,  the  Riksbank  is  entitled  to  a  note 
issue6  not  exceeding  100,000,000  kronor,  on  condition  that 
the  notes  thus  issued  are  covered  by  assets  of  the  following 
classes:  (a)  Readily  realizable  foreign-government  se- 
curities ;  (6)  the  bonds  of  the  State  (Sweden) ,  and  of  the 
General  Mortgage  Bank,  and  other  Swedish  bonds  which 
are  quoted  on  foreign  bourses;  (c)  bills  of  exchange, 
inland  or  foreign. 

§8.  As  the  metallic  reserve  of  the  Riksbank  .there  shall  be 
included  all  Swedish  and  foreign  gold  coin  and  gold  bullion 

°  By  the  law  of  May  3,  1901,  the  last  five  words  of  (c)  were  altered  to  "  banks 
or  banking  firms,"  and  there  was  added  to  the  clause  the  words  "after 
deduction  of  the  amount  owing  on  accounts  of  that  nature  by  the  Riks- 
bank." 

&  In  place  of  the  words  "not  exceeding  100,000,000  kronor,"  etc.,  there 
were  substituted  by  the  law  of  May  3,  1901,  the  words  "of  100,000,000 
kronor,  and  in  the  event  of  the  metallic  reserve  being  in  excess  of  40,000,000 
kronor,  of  a  further  amount  not  exceeding  the  sum  by  which  the  metallic 
reserve  exceeds  40,000,000  kronor  The  Riksbank's  outstanding  notes 
shall,  in  so  far  as  they  exceed  the  cash  assets  specified  in  §6,  be  covered 
by  assets  of  the  following  classes:  *  *  * 

157 


National    M  o  n  et  ar  y     Commission 

which  is  the  property  of  the  bank  and  is  located  within 
the  kingdom. 

The  metallic  reserve  shall  be  maintained  at  an  amount 
not  less  than  25,000,000  kronor. a  The  Riksbank  shall,  in 
the  event  of  the  notes  issued  in  accordance  with  the  terms 
of  §7  being  in  excess  of  60,000,000  kronor,  hold  an  addi- 
tional amount  of  metallic  reserve  amounting  to  at  least 
30  per  cent  of  the  amount  by  which  such  notes  are  in 
excess  of  60,000,000  kronor. 

CHAPTER  III. — Of  the  business  of  the  bank. 

§9.  The  Riksbank  shall  conduct  its  business  at  its  head 
office  in  Stockholm  and  at  branches  within  the  Kingdom; 
and  at  least  one  such  branch  shall  be  situated  in  each  of 
the  counties  except  Stockholm  county. 6 

§10.  The  Riksbank  may  buy  and  sell  gold  and  silver. 
Gold  bullion,  delivered  to  the  mint  for  account  of  the  Riks- 
bank, shall  be  paid  for  by  the  bank  at  its  value  in  Swedish 
money,  or  2,480  kronor  per  kilogram  of  fine  gold,  with  a 
deduction  of  a  quarter  of  i  per  cent  for  the  expenses  of 
minting,  and,  in  addition,  if  alloying  or  refining  be  re- 
quired, the  charges  fixed  for  these  services.  The  managers 
of  the  Riksbank  may,  however,  in  case  they  judge  it  advis- 
able, relieve  the  seller  of  the  expenses  of  minting  or  any 
part  thereof. 

§11.  The  Riksbank  may  buy  and  sell  bills  of  exchange, 
drawn  on  foreign  firms  or  on  persons  resident  abroad,  pay- 

fflBy  the  law  of  May  3,  1901,  there  was  substituted  for  25,000,000  to  the 
end  of  the  section,  the  words  "40,000,000  kronor.  " 

&The  word  rendered  here  "county"  is,  in  the  original,  "Ian,"  and  de- 
scribes the  districts  into  which  the  Kingdom  is  divided  for  local  govern- 
ment purposes  There  are,  in  all,  24  such  districts 

158 


The      Swedish     Banking     System 

able  within  six  months  either  at  a  place  abroad  or  in 
Sweden,  and  may  also  acquire  other  foreign  obligations 
payable  within  the  above  specified  time,  and  again  dispose 
of  such  holdings. 

§12.  The  Riksbank  may  (a)  buy  and  sell  Swedish  bonds, 
and  such  foreign  government  securities  as  are  quoted  on 
foreign  stock  exchanges  and  are  readily  realizable;  (6) 
otherwise  acquire  both  the  bonds  of  the  Swedish  Govern- 
ment and  readily  realizable  foreign  government  securi- 
ties; (c)  act  as  agent  in  the  purchase  and  sale  of  bonds  of 
the  Swedish  Government  and  of  the  General  Mortgage 
Bank. 

§13.  The  Riksbank  may  make  advances  in  any  of  the 
following  ways : 

(a)  By  discounting  accepted  bills  of  exchange  payable 
in  Sweden  within  six  months. 

(6)  By  advances  against  a  contract  for  repayment 
either  at  a  fixed  date  not  exceeding  six  months  from  the 
date  of  the  advance,  or  on  not  exceeding  three  months' 
notice,  and  secured  by  bonds,  shares,  or  other  documentary 
security  as  collateral.  Communal  authorities  and  other 
bodies  of  similar  public  status  may,  however,  be  granted 
advances  on  the  above-named  conditions  of  repayment, 
without  collateral  security  in  addition  to  their  own  notes. 

(c)  By  advances  against  a  contract  for  repayment  at  a 
fixed  date  not  exceeding  six  months  from  the  date  of  the 
advance,  and  secured  by  a  lien  on  merchandise  stored  in  a 
public  warehouse  or  in  charge  of  third  parties  who  bind 
themselves  to  hold  the  goods  or  their  value  at  the  disposal 
of  the  bank  and  are  judged  trustworthy  in  respect  of  such 
an  undertaking. 

159 


National    M  o  n  e  t  ar  y     Commission 

(d)  By  the  grant  of  cash  credits  and  credit  on  current 
account  for  terms  not  exceeding  twelve  months  secured 
by  collateral  consisting  of  bonds,  shares,  or  mortgages  on 
real  estate  or  of  personal  guaranties;  in  this  department 
of  the  Riksbank's  business,  however,  a  sum  not  exceeding 
in  all  15,000,000  kronor  may  be  employed,  exclusive  of  the 
credit  specified  in  §  14. 

The  Riksbank  may  also  grant  loans  on  contracts  re- 
quiring repayment  at  certain  fixed  intervals  (installment 
loans)  and  secured  by  such  collateral  as  is  specified  in  (d) . 
These  loans  may  at  no  time  exceed,  in  the  aggregate, 
25  per  cent  of  the  capital  of  the  Riksbank. a 

§  14.  The  national  debt  office  shall  be  entitled  to  an  open 
credit  at  the  Riksbank  to  an  amount  not  exceeding 
1,500,000  kronor.  The  national  debt  office  shall  not  be 
required  to  deposit  security  for  advances  under  this  head 
or  to  pay  any  commission. 

§  15.  Loans  may  be  made  to  members  of  the  managing 
committee  of  the  Riksbank  or  of  any  of  its  branches 
only  on  the  security  of  merchandise  stored  in  a  public 
warehouse  or  of  bonds  of  the  Swedish  Government,  of 
the  General  Mortgage  Bank,  or  of  mortgage  associations, 
and  open  credits  may  be  granted  them  only  on  the  security 
of  the  bonds  specified. 

Loans,  open  credits,  or  overdrafts  may  not  be  granted 
on  the  guaranty  of  a  member  of  the  managing  committee 

a  By  the  law  of  Mfay  14, 1902,  the  final  paragraph  of  §  13  was  altered  to 
read  as  follows: 

"From  a  separate  fund  under  the  administration  of  the  Riksbank  (the 
installment  loan  fund),  with  a  capital  of  12,500,000  kronor,  the  bank  may 
grant  loans  on  contracts  requiring  repayment  at  certain  fixed  intervals, 
and  secured  by  such  collateral  as  is  specified  in  (d)." 

1 60 


The     Swedish     Banking     System 

of  the  bank  or  of  any  of  its  branches ;  and  bills  of  exchange 
bearing  the  name  of  a  member  of  the  managing  commit- 
tee of  the  bank,  or  of  any  of  its  branches,  as  drawer, 
acceptor,  or  last  indorser  may  not  be  discounted  by  the 
Riksbank. 

§  1 6.  The  Riksbank  shall,  both  at  its  head  office  and 
at  its  branches,  receive  from  everyone  who  demands  the 
accommodation : 

(a)  Deposits  of  money  repayable  without  interest  on 
demand  or  at  a  time  fixed  when  the  deposit  is  made.  No 
charge  shall  be  made  for  receiving  such  deposits,  and  the 
receipt  for  the  amount  deposited  shall  be  made  out  in 
favor  of  a  person  named  therein. 

(6)  Deposits  of  money,  also  witheut  charge  and  free  of 
interest,  to  be  credited  to  a  ledger  account  in  favor  of  the 
depositor  (giro-account) ,  the  balance  of  the  account  to  be 
held  at  the  disposal  of  the  depositor  on  demand. 

In  connection  with  these  latter  accounts  the  Riksbank 
shall  make  such  arrangements  as  may  be  necessary  for 
the  efficient  conduct  of  the  clearing  house. 

The  managers  shall  be  empowered  further  to  open  cur- 
rent accounts,  and  to  pay  interest  on  the  balances  of  such 
accounts,  for  firms  which  do  discounting  business  with 
the  Riksbank,  provided  they  do  not  themselves  conduct 
banking  business. 

§  17.  The  Riksbank  is  required  to  receive  money  on 
behalf  of  the  Government  and  to  effect  payments  from 
credit  balances  so  held,  in  accordance  with  the  directions 
on  the  subject  contained  in  the  regulations  of  the  Riks- 
bank. No  interest  shall  be  payable  on  sums  thus  held  by 
the  bank. 

22150 — 10 ii  161 


National    Monetary     Commission 

§  1 8.  Everyone  is  entitled  to  make  payments  of  money 
at  the  head  or  any  branch  office  of  the  Riksbank,  and  to 
receive  in  exchange,  free  of  charge,  a  draft  for  the  amount 
on  the  Riksbank  in  Stockholm,  payable  on  presentation. 

§  19.  The  Riksbank  shall  receive  for  safe-keeping  de- 
posits of  gold  or  silver,  coin  or  bullion,  and  of  bonds, 
shares,  or  other  securities.  The  regulations  of  the  Riks- 
bank shall  specify  both  how  far  such  business  shall  be 
conducted  at  other  offices  than  the  head  office  (at  which 
facilities  for  receiving  valuables  shall  always  be  provided) , 
and  the  detailed  rules  which  may  be  found  requisite  for 
the  purpose. 

Sealed  deposits  shall  also  be  accepted  for  safe-keeping 
at  the  Riksbank,  in  accordance  with  the  detailed  regula- 
tions on  the  subject. 

§  20.  The  Riksbank  shall,  when  it  is  deemed  requisite 
by  the  managers,  arrange  for  foreign  loans  or  credits  not 
exceeding  in  amount  the  limit  specified  in  the  regulations 
of  the  Riksbank. 

Further,  the  Riksbank  may  open  accounts,  with  or  with- 
out interest,  with  such  banking  and  mercantile  houses 
abroad  as  are  of  good  repute  and  sound  credit. 

§21.  The  Riksbank  may  conduct  a  printing  business  at 
its  printing  works  and  the  business  of  paper  making  at 
its  paper  mills. 

§  22.  The  Riksbank  shall  not  take  part  in  or  conduct 
any  class  of  business  other  than  those  which  are  expressly 
permitted  to  it  by  the  terms  of  this  law;  nor  shall  the 
Riksbank  own  other  real,  estate  than  that  which  is  de- 


162 


The     Swedish     Banking     System 

voted  to  the  accommodation  of  its  offices  and  that  which 
is  found  requisite  for  the  paper  mills  and  printing  works. 
In  case  the  rights  of  the  Riksbank  shall  be  affected  by 
the  sale  by  auction  of  real  estate  or  other  property  on 
which  it  has  a  lien,  the  bank  shall  not  be  prevented  from 
buying  in  such  property;  but  property  thus  acquired 
shall  be  again  disposed  of  when  a  suitable  opportunity 
occurs  and,  in  any  case,  when  it  can  be  effected  without 
loss. 

CHAPTER  IV. — Of  accounts  and  their  publication  and  of 
the  reserve  fund. 

§  23.  At  the  end  of  every  calendar  year  the  books  of 
the  Riksbank  shall  be  completely  made  up,  and  a  sum- 
mary, giving  a  complete  presentation  of  the  position  of 
the  bank,  shall  be  prepared  on  the  basis  thus  determined 
and  shall  be  printed  and  distributed  with  the  Official 
Gazette  as  speedily  as  possible. 

§  24.  Immediately  after  the  close  of  each  month  a 
summary  shall  be  prepared  showing  under  their  several 
heads  the  assets  and  liabilities  of  the  Riksbank.  This 
summary  shall  be  promptly  printed  and  distributed  with 
the  Official  Gazette. 

For  each  week  there  shall  be  drawn  up  and  inserted 
in  the  Official  Gazette  a  statement  of  the  metallic  reserve 
of  the  Riksbank,  and  of  the  other  cash  items  specified  in 
§  6,  together  with  the  amount  of  the  outstanding  notes 
and  of  the  amount  by  which  the  legal  rights  of  issue 
exceed  the  actual  issue. 


163 


National    M  o  n  et  ar  y     Commission 

§  25.  The  Parliament  has  the  right  to  determine  the 
disposal  of  the  yearly  profits  of  the  Riksbank,  with  due 
regard  to  the  provisions  of  §  26  below." 

§  26.  Of  the  realized  yearly  profits  of  the  Riksbank  at 
least  10  per  cent  shall  be  assigned  to  the  reserve  fund 
of  the  bank.  When  the  reserve  fund  has  reached  at 
least  25  per  cent  of  the  bank's  capital,  further  payments 
to  the  reserve  fund  may  cease.  Should  the  reserve  fund 
at  any  time  be  reduced  below  this  amount,  allocations 
to  it  from  the  profits  shall  be  renewed. 

The  Riksbank  shall  hold  an  amount  corresponding  to 
not  less  than  the  amount  of  the  reserve  fund  in  easily 
realizable  foreign  government  securities.  It  shall  be  the 
duty  of  the  managers  in  case  it  be  necessary  at  any  time 
to  dispose  of  such  securities  for  the  purpose  of  strength- 
ening the  cash  items  specified  in  §  6,  or  of  providing  for 
losses  incurred  in  the  course  of  the  bank's  business,  so 
that  the  holding  of  these  securities  falls  below  the  amount 
specified  above,  to  restore  the  amount  to  a  figure  cor- 
responding to  the  reserve  fund  as  soon  as  it  may  be 
possible  to  do  so. 

CHAPTER  V. — Of  the  management  of  the  bank. 

§  27.  The  Riksbank  shall,  in  accordance  with  §  72  of 
the  Constitution  and  §  71  of  the  regulations  of  Parliament, 
be  managed  by  seven  directors. 

a  To  this  there  was  added  by  the  law  of  14  May,  1902,  the  following: 
"With  the  yearly  profits  of  the  Riksbank  shall  be  reckoned  the  profit 
arising  from  the  operations  of  the  installment  loan  fund,  provided  that  in 
case  this  fund  shall  be  reduced  by  losses  below  the  amount  of  12,500,000 
kroner,  the  yearly  profits  of  the  fund  shall  thereafter  be  devoted  in  the 
first  place  to  bringing  the  fund  up  to  that  amount." 

164 


The     Swedish     Banking     System 

The  president,  who  may  not  hold  any  other  office  in 
the  Riksbank,  shall  be  paid  out  of  the  funds  of  the  bank 
an  annual  salary  equal  to  that  of  each  of  the  other  direct- 
ors as  determined  by  the  scale  of  salaries  fixed  by  Parlia- 
ment. 

§  28.  In  accordance  with  §  72  of  the  Constitution  and 
§  73  of  the  regulations  of  Parliament,  four  substitutes 
shall  be  appointed  for  the  directors. 

§  29.  Members  of  the  council  of  the  state  or  managers 
of  the  national  debt  office  may  not  be  directors  of  the 
Riksbank. 

§  30.  No  person  shall  be  appointed  a  director  of  the 
Riksbank  unless  he  be  a  Swedish  citizen;  nor  if  he  be 
subject  to  legal  guardianship;  nor  if  his  property  has  been 
in  the  hands  of  receivers  and  he  can  not  show  that  it  has 
passed  from  their  control;  nor  if  he  has  been  condemned 
to  loss  of  civil  rights  or  be  charged  with  offenses  which 
may  result  in  such  loss;  nor  if  he  has  been  excluded 
from  practice  in  the  courts  of  law  or  from  holding  service 
under  the  Crown. 

A  director  may  not  be  a  member  of  the  managing  board 
of  any  other  bank  except  a  savings  bank  or  the  Postal 
Savings  Bank. 

§  31.  In  case  the  King,  either  on  representation  from 
the  directors  of  the  Riksbank  or  for  other  reason,  shall 
appoint  a  representative  to  discuss  any  special  business 
with  the  directors,  the  directors  shall  hold  a  consultation 
with  the  King's  representative,  but  they  are  forbidden  to 
arrive  at  a  determination  of  the  matter  under  discussion 
until  the  said  representative  has  withdrawn. 


165 


National    Monetary     Commission 

§  32.  After  the  close  of  each  year  the  directors  shall 
present  to  the  parliamentary  committee  on  banking  a  re- 
port on  the  position,  the  business,  and  the  management 
of  the  Riksbank.  This  report  shall  be  printed  and  be 
made  accessible  to  the  public. 

§  33.  The  boards  of  management  of  the  branch  offices 
shall  be  appointed  by  the  directors  in  accordance  with  the 
more  detailed  provisions  of  the  regulations  for  the  Riks- 
bank. 

§  34.  The  directors  may  not  receive  instructions  re- 
garding the  business  of  the  Riksbank  from  any  other 
authority  than  the  Parliament  and  from  the  parlia- 
mentary committee  on  banking  in  respect  of  those  mat- 
ters in  which  the  committee  is  entitled  to  give  instruc- 
tions on  behalf  of  Parliament.  The  directors  are  in  these 
matters  responsible  to  the  Parliament  or  its  banking  com- 
mittee and  auditors  alone. 

Questions  touching  the  freedom  from  responsibility  of 
directors  shall  be  determined  by  the  Parliament. 

The  responsibility  of  directors  and  of  managers  of 
branch  offices  shall  be  determined  by  special  statutes. 

§  35.  A  director  of  the  Riksbank  or  a  member  of  the 
managing  board  of  a  branch  office  may  not  act  as  agent 
in  connection  with  the  discount  of  bills  of  exchange  or  the 
provision  of  loans  or  open  credits  at  the  head  or  branch 
offices  of  the  Riksbank. 

Should  this  regulation  be  broken  by  a  director,  informa- 
tion shall  be  given  to  the  law  officers  of  Parliament,  who 
shall  take  proceedings  in  accordance  with  the  provisions 
of  the  statutes  regulating  the  responsibility  of  directors. 


166 


The     Swedish     Banking     System 

Should  the  regulation  be  broken  by  a  member  of  the 
managing  board  of  a  branch  office,  procedings  shall  be 
taken  in  accordance  with  the  regulations  of  the  Riksbank 
and  the  special  statute  regulating  the  responsibility  of 
such  managers. 

§  36.  The  following  matters  relating  to  the  business  of 
the  Riksbank  shall  be  regarded  as  confidential:  Particu- 
lars of  discounts,  loans,  credits,  and  other  matters  involv- 
ing the  relations  of  clients  to  the  bank,  the  consideration 
and  determination  by  the  directors  of  the  matters  speci- 
fied in  §  ii  and  in  §  12,  subsections  (a)  and  (6)  of  this  law, 
the  means  of  maintaining  the  metallic  reserve,  and  the 
manufacture  of  bank  notes. 

The  consideration  and  determination  of  such  questions 
shall  be  dealt  with  in  special  records,  the  contents  of 
which  shall  be  kept  secret  so  long  as  the  banking  com- 
mittee of  Parliament,  the  auditors,  or  the  directors  of 
the  Riksbank  shall  consider  that  secrecy  is  necessary 
in  the  interests  of  the  bank. 

§  37.  The  directors  and  auditors  and  the  members  of 
managing  boards  of  branches,  all  officers  of  the  Riksbank, 
and  those  who  assist  the  auditors  in  their  examination 
of  the  conduct  and  management  of  the  bank  shall  main- 
tain complete  secrecy  as  to  everything  regarding  the 
relations  of  private  persons  to  the  Riksbank  and  every- 
thing touching  the  management  which  is  of  such  a  nature 
as  to  require  secrecy  in  accordance  with  this  law  and 
the  regulations  of  the  Riksbank. 

§  38.  Further  instructions  regarding  the  management 
of  the  Riksbank  which  may  be  necessary,  in  addition 


167 


National    Monetary     Commission 

to  the  provisions  of  this  law,  shall  be  set  forth  by  Par- 
liament in  special  regulations. 

These  regulations  shall  be  drafted  in  such  agreement 
with  the  provisions  of  this  law  that  they  may  contain 
nothing  which  is  in  conflict  with  the  law. 

CHAPTER  VI. — Transitional  provisions. 

§  39.  This  law  shall  be  in  force  from  January  i,  1899, 
except  as  to  those  parts  which  are  specified  below. 

§  40.  The  provisions  of  Chapter  V  as  to  the  conduct 
and  management  of  the  Riksbank  shall  become  opera- 
tive immediately. 

§  41.  In  accordance  with  the  law  regarding  the  rights 
of  note-issue  of  the  Riksbank  and  the  tribunal  under 
whose  jurisdiction  it  is  placed,  private  banks  retain  the 
right  of  issuing  their  own  notes  until  the  end  of  the  year 
1903,  and  the  Riksbank  is  required  to  grant  to  these 
banks  the  facilities  specified  below. 

From  the  beginning  of  the  year  1899  and  till  the  end 
of  the  year  1903  any  private  bank  which,  after  at  least 
three  months'  notice  to  the  secretary  of  the  department 
of  finance,  abandons  its  right  to  issue  its  own  bank  notes 
and  maintains  all  those  branch  offices  which  were  in 
operation  on  January  i,  1896,  shall  be  entitled  to  the 
following  facilities : 

The  grant  of  an  open  credit,  up  to  the  half  of  the 
amount  of  its  notes  outstanding  on  the  last-named  date, 
against  security  approved  by  the  directors  and  without 
other  charge  than  interest  on  the  amount  drawn,  which 


168 


The     Swedish     Banking     System 

shall  be  charged  at  2  per  cent  below  the  current  rate  for 
the  discount  of  three-months'  bills  of  exchange,  provided 
the  rate  charged  is  not  less  than  2  per  cent  per  annum. 

The  rediscount  at  the  Riksbank,  up  to  the  half  of  the 
amount  named,  of  bills  of  exchange  approved  by  the 
directors,  at  a  rate  of  discount  not  exceeding  two-thirds 
of  that  otherwise  in  force  at  the  Riksbank. 

On  the  receipt  of  the  above-named  notice  by  the  sec- 
retary of  the  department  of  finance,  the  directors  of  the 
Riksbank  shall  be  immediately  informed  thereof. 

From  the  beginning  of  the  year  1904  to  the  end  of  the 
year  1908  any  private  bank  which  has  maintained  all  the 
branch  offices  specified  above  shall  be  entitled  to  redis- 
count facilities  on  the  terms  above  named  to  the  amount 
of  40  per  cent  of  the  aggregate  of  its  notes  outstanding 
on  January  i,  1896. 

In  case  a  private  bank  which,  in  accordance  with  the 
above  provisions,  receives  or  would  otherwise  be  entitled 
to  receive  credit  or  rediscount  privileges,  has  closed  or 
shall  thereafter  close  any  of  its  branch  offices  which 
were  in  operation  on  January  i,  1896,  the  King  may 
determine,  with  due  regard  to  the  extent  and  importance 
for  the  business  of  the  community  of  the  offices  thus 
closed,  whether  and  how  far  their  closing  shall  involve 
the  reduction  of  the  amount  of  such  credits  or  rediscounts, 
or  whether  the  bank  shall  be  entirely  deprived  of  these 
privileges. 

The  right  to  credit  and  to  rediscounting  facilities, 
which  is  set  forth  above,  shall  be  retained  even  should 


169 


National    M on  et ar y     Commissio 


n 


the  private  bank  be  converted   into  a  limited  liability 
banking  company.0 

"  By  the  law  of  May  3,  1901,  the  following  important  addition  was  made 
to  the  provisions  of  §  41 : 

"  In  place  of  the  facilities  herein  secured  to  private  banks,  the  directors 
of  the  Riksbank  shall  be  entitled  to  grant  to  any  private  bank  which,  under 
arrangements  made  with  the  directors  as  to  the  time  and  conditions  for  the 
cessation  of  its  issues  of  notes,  shall  resign  its  rights  of  note  issue  before 
the  end  of  the  year  1903,  and  has  not  closed  and  does  not,  throughout  the 
period  of  the  agreement,  close  any  of  the  branch  offices  which  were  in 
operation  on  January  i,  1896,  without  the  assent  of  the  King  or  the  direct- 
ors, the  following  facilities,  viz: 

"  A  loan  not  exceeding  65  per  cent  of  the  amount  of  the  private  bank's 
notes  outstanding  on  January  i,  1901,  and  an  open  credit  not  exceeding  10 
per  cent  of  the  same  amount,  against  security  approved  by  the  directors, 
and  the  private  bank  shall  be  entitled  to  be  relieved  of  other  charges 
on  the  open  credit  than  interest  on  the  amount  drawn,  but  shall  be  re- 
quired to  pay,  both  on  the  loan  and  on  the  credit,  interest  at  2  per  cent 
less  than  the  current  rate  of  discount  charged  by  the  Riksbank  on  three 
months'  bills  of  exchange,  provided  that  the  rate  thus  fixed  be  not  less 
than  2  per  cent  per  annum.  The  amount  of  the  loan  and  of  the  credit 
shall,  before  the  end  of  the  month  of  December  in  each  year,  beginning 
with  the  year  1903,  be  reduced  by  one-eighth  part  of  their  original  amounts. 

"The  directors  shall  be  entitled  further  to  grant  to  a  private  bank,  in 
accordance  with  such  an  arrangement  as  is  specified  above,  the  right  of 
rediscounting  at  the  Riksbank  bills  of  exchange,  approved  by  the  directors, 
within  the  limit  of  25  per  cent  of  the  private  bank's  bank  notes  outstanding 
on  January  i,  1901,  at  a  rate  of  discount  not  exceeding  two-thirds  of  the 
rate  otherwise  current  at  the  Riksbank.  This  right  of  rediscount  shall 
also,  beginning  with  the  close  of  the  year  1903,  be  reduced  each  year  by 
one-eighth  part  of  its  original  amount. 

"The  facilities  thus  granted  to  a  private  bank  shall  be  retained,  in  case 
the  private  bank  be  converted  into  a  limited  liability  banking  company,  by 
the  said  company. 

"The  directors  shall,  further,  be  entitled  in  the  case  of  any  limited  lia- 
bility banking  company  into  which  a  private  note-issuing  bank  may  have 
been  converted  before  January  i,  1901,  to  make  arrangements  in  reference 
to  the  facilities  specified  above,  but  based  on  the  said  bank's  outstanding 
circulation  on  January  i,  1896. 

"  When  a  private  bank  has  effected  an  arrangement  with  the  directors 
of  the  Riksbank  whereby  it  undertakes  to  resign  its  note-issuing  rights 
on  a  fixed  date,  the  directors  shall  notify  the  secretary  of  the  department 
of  finance  thereof  without  delay." 


170 


The     Swedish     Banking     System 

§  42.  In  the  interval  from  the  beginning  of  the  year 
1899  to  the  end  of  the  year  1903  the  assets  which,  in  ac- 
cordance with  §  7,  are  required  to  be  held  against  the  excess 
of  the  Riksbank's  circulation  over  and  above  the  amount 
determined  in  accordance  with  §  6,  may  include  such 
claims  on  private  banks  in  respect  of  credits  granted  to 
them  as  are  specified  in  §  41.° 

§  43.  The  provisions  of  §  9  in  regard  to  branch  offices 
of  the  Riksbank  shall  be  brought  into  operation  gradually, 
and  shall  be  completely  carried  out  before  the  .close  of  the 
year  1904. 

a  In  accordance  with  the  modification  of  §  41,  the  form  of  §  42  was 
changed  by  the  law  of  May  3,  1901,  to  the  following: 

"  Among  the  assets  which,  in  accordance  with  §  7,  are  required  to  be  held 
against  the  excess  of  the  Riksbank's  circulation  over  and  above  the  amount 
determined  in  accordance  with  §  6,  may  be  included,  up  to  the  end  of  the 
year  1903,  the  claims  on  private  banks  in  respect  of  credits  granted  them, 
which  are  specified  in  the  second  paragraph  of  §  41,  and  also  to  the  end  of 
the  year  1910  the  loans  to  private  banks  and  the  claims  on  such  banks  in 
respect  of  credits  granted  them  which  are  specified  in  the  seventh  (i.  e.,  the 
supplementary)  paragraph  of  the  same  section. 


171 


APPENDIX  II. 

B.  REGULATIONS  FOR  THE  ADMINISTRATION  AND  MANAGE- 
MENT OF  THE  BANK  OF  SWEDEN  (THE  RIKSBANK,)  ISSUED 
MAY  29,  1907. 

PART  i.— GENERAL  PROVISIONS. 

§  i.  The  Riksbank  remains  under  the  guaranty  of  the 
Parliament,  and  is  managed  by  the  directors  appointed 
for  that  purpose  in  accordance  with  the  law  jointly 
sanctioned  by  the  King  and  Parliament  and  the  special 
provisions  of  the  present  regulations. 

§  2.  (i)  The  capital  and  reserve  fund  of  the  bank  are 
determined  by  the  law  for  the  Bank  of  Sweden  of  the  1 2th 
May,  1897,  §§2  and  26. 

(2)  The  surplus  of  net  assets  over  and  above  the  amount 
of  the  capital  and  reserve  fund  shall  be  entered  in  the 
balance  sheet  as  reserved  resources. 

§  3.  In  regard  to  the  note  issue  and  the  metallic  reserve, 
the  provisions  of  the  law  for  the  Bank  of  Sweden  of  the 
1 2th  May,  1897,  Cap.  II,  apply. 

§  4.  The  bank  is  required  to  redeem  its  notes  on  demand 
at  its  head  office  on  the  basis  determined  by  the  King  and 
Parliament,  so  that  notes  in  kronor  or  currency  dalers 
are  redeemed  at  their  face  value,  notes  in  specie  dalers 
or  bank  dalers  at  the  rate  of  i  specie  daler  or  bank  daler 
for  1^2  currency  dalers,  and  note  "  10  skillings 

copper  after  the  same  rate  as  for  notes  in  bank  dalers. 


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National    Monetary     Commission 

§  5.  The  procedure,  in  the  event  of  the  failure  of  the 
bank  to  redeem  its  notes  on  demand,  is  determined  by 
the  law  relating  to  the  note-issuing  rights  of  the  Bank  of 
Sweden,  etc.,  of  the  i2th  May,  1897,  §  2. 

§  6.  The  publication  of  bank  statements  is  determined 
by  §§23  and  24  of  the  law  for  the  Bank  of  Sweden  of  the 
1 2th  May,  1897. 

PART  2.— OF  THE  BUSINESS  OF  THE  BANK. 

(a)  Of  the  purchase  and  sale  of  gold,  silver,  foreign  bills  of 
exchange,  and  bonds,  and  of  the  maintenance  of  the  metallic 
reserve. 
§  7.   (i)  At  both  the  head  and  branch  offices  of  the  bank 

Swedish  gold  coin,  struck   in  accordance  with  the  royal 

ordinance  of  the  3ist  July,   1868,  and  earlier  statutes, 

is  accepted  at  its  value  in  current  coin. 

(2)  Swedish  silver  coin,  struck  in  accordance  with  the 
royal  ordinance  of  the  3d  February,    1855,   and  earlier 
statutes,  is  accepted  by  the  bank  on  the  basis  determined 
by  §  3  of  the  law  of  3Oth  May,  1873,  respecting  the  intro- 
duction of  the  new  coinage  system. 

(3)  In  regard  to  foreign  gold  and  silver  coin  which  is 
not  authorized  to  pass  as  current  money  in  Sweden  in 
accordance  with  conventions  to  that  effect,  the  directors 
have  power  to  determine  both  the  varieties  of  coin  which 
shall  be  purchased  and  the  price  to  be  given  for  each. 

(4)  The  purchase  and  sale  of  gold  and  silver  are  provided 
for  in  the  law  for  the  Bank  of  Sweden  of  the  i2th  May, 
1897,  §  10. 

Gold  and  silver  imported  by  sea  shall  be  covered  by  a 
marine  insurance  policy. 

174 


The     Swedish      Banking     System 

(5)  In  regard  to  the  acceptance  of  uncoined  gold  at 
the  branch  offices,  the  directors  are  empowered  to  lay 
down  such  regulations  as  they  may  deem  necessary. 

(6)  The  directors  may  determine  whether  bar  silver 
and  other  uncoined  silver  may  be  purchased  by  the  bank 
and  may,  after  inquiry,  fix  the  price  to  be  paid. 

(7)  The  directors  are  empowered  to  decide  as  to  the 
emission  of  Swedish  gold  coin  struck  before  the  year  1873, 
or  of  foreign  gold  or  silver  coin  which  is  not  authorized 
to  pass  as  current  money  in  Sweden  in  accordance  with 
conventions  to  that  effect. 

(8)  Bar  gold  and  bar  silver  is  held  at  the  head  office 
for  sale  at  such  advance  in  price  as  the  directors  may 
determine. 

§  8.  (i)  The  right  of  the  bank  to  purchase,  or  to 
acquire  otherwise,  and  to  sell,  both  foreign  securities  and 
certain  classes  of  bonds,  and  to  act  as  agent  in  the  pur- 
chase and  sale  of  Swedish  and  foreign  bonds,  is  deter- 
mined by  the  law  for  the  Bank  of  Sweden  of  the  i2th 
May,  1897,  §§  ii  and  12. 

(2)  The  directors  are  empowered  to  place  the  bank's 
holdings  of  foreign  securities  on  deposit  with  known  and 
reliable  foreign  banking  establishments  or  business  houses, 
and  to  issue  drafts  against  such  deposits. 

(3)  The  directors  have  the  right  to  determine  in  each 
individual  case  the  conditions  on  which  accounts  shall 
be    opened    with    foreign    banking    establishments    and 
business  houses  in  accordance  with  the  law  for  the  Bank 
of  Sweden  of  the  i2th  May,  1897,  §  20,  second  part. 


175 


National     M on  et ar y     Commission 

In  the  event  of  the  metallic  reserve  showing  a,  ten- 
dency to  dimmish  to  the  amount  fixed  as  its  minimum 
limit  by  §  8  of  the  law  for  the  Bank  of  Sweden  of  the 
1 2th  May,  1897,  it  shall  be  the  duty  of  the  directors  to 
take,  in  good  time,  such  steps  as  may  be  deemed  appro- 
priate in  the  circumstances  of  each  case,  either  by  the 
sale  of  bonds  or  government  securities,  by  the  reduction 
of  the  outstanding  note  issue  through  decrease  of  loans 
and  discounts,  or  by  the  use  of  credits  arranged  abroad. 
The  directors  have  the  power  to  select  that  or  those  of 
the  courses  specified  which  they  may  deem  best  in  the 
circumstances  for  the  attainment  of  the  end  in  view. 

§  10.  The  amount  of  the  foreign  credit  of  which  the 
bank  is  empowered  to  make  use  by  the  law  for  the  Bank 
of  Sweden  of  the  i2th  May,  1897  (§20,  first  part),  may 
not  exceed  20,000,000  kronor. 

(b)  Of  the  notes  of  the  bank,  of  the  exchange  of  notes  and  of 
coin,  and  of  other  means  of  payment  received  by  the 
bank. 

§  ii.  (i)  The  text  of  the  notes  which  the  bank  issues 
in  accordance  with  the  law  for  the  Bank  of  Sweden  of 
the  1 2th  May,  1897,  shall  run  as  follows:  The  Bank  of 

Sweden  will,  on  demand,  redeem  this  note  of kronor 

with  gold  coin  in  accordance  with  the  law  of  the  3oth 
May,  1873,  respecting  the  coin  of  the  realm. 

(2)  These  notes  shall  bear  the  signatures  of  two  of 
the  bank's  officers.  Notes  of  the  i  ,000  kronor  denomina- 
tion shall  be  signed  by  hand,  but  the  signatures  shall  be 
printed  on  notes  of  other  denominations. 


176 


The     Swedish      Banking     System 

(3)  The   head   and   branch   offices   of   the  bank   shall 
always  be  provided  with  the  bank's  notes  for  exchange 
against  lawful  coin  of  the  realm. 

(4)  In  regard  to  the  redemption  of  worn  and  damaged 
notes,  the  provisions  of  the  royal  ordinances  of  the  5th 
March,  1836,  the  4th  February,  1859,  the  7th  November, 
1873,  and  the  24th  October,  1890,  shall  be  followed,  and 
also  the  instructions  for  officers  of  the  bank's  head  office. 

(5)  In  the  case  of  the  presentation  of  notes  so  soiled 
and  damaged  that  the  redemption  is  a  matter  of  the 
investigation  and  testing  of  special  considerations  and 
evidence,  and  not  of  the  examination  of  the  notes  them- 
selves, the  directors  shall  determine  the  question  of  their 
redemption. 

(6)  Notes  of  denominations  expressed  in  dalers,  and 
notes  of  i  krona,  when  received  at  the  bank,  shall  be 
rendered   unusable   in   the  manner   prescribed   for   that 
purpose. 

§  12.  There  shall  be  available  at  the  head  office  of  the 
bank  Swedish  coin,  including  divisional  coin  of  all  the 
denominations  struck  at  the  mint  under  the  existing 
laws.  It  is  the  duty  of  the  directors  to  insure  that  so 
far  as  possible  the  requisite  supplies  of  each  variety  are 
provided. 

Further,  in  accordance  with  §  16  of  the  law  respecting 
the  coin  of  the  realm  of  the  3oth  May,  1873,  there  shall 
always  be  provided  at  the  branch  offices  in  Gothenburg 
and  Malmo  a  stock  of  gold,  silver,  and  bronze  coin  suffi- 
cient for  the  exchange  of  such  currency  as  is  legal  tender 


22150—10 12  177 


National     M  o  n  et  ar  y     Commission 

only  in  payments  to  the  State  against  equal  sums  of  cur- 
rent coin,  and  for  the  issue  of  gold  coin  in  exchange  for 
divisional  money  in  any  multiple  of  10  kronor. 

At  other  branch  offices  gold,  silver,  and  bronze  coin  is 
paid  out  only  in  proportion  as  it  is  received. 

The  currency  of  coin,  including  divisional  coin,  is  de- 
termined in  the  law  respecting  the  coin  of  the  realm  of  the 
3oth  May,  1873,  §§  J3  and  14,  the  latter  as  modified  by 
the  royal  ordinance  of  the  25th  June,  1881. 

§  13.  (i)  The  head  and  branch  offices  shall  accept,  in 
exchange  for  current  money,  any  amounts  of  copper  coin, 
struck  in  accordance  with  mint  indentures  of  earlier  date 
than  the  year  1855,  and  of  the  tokens  issued  by  the  national 
debt  office.  Such  coins  and  tokens  shall  not  be  reissued. 

(2)  Divisional  money  of  copper,  struck  in  accordance 
with  the  mint  indenture  of  1855,  shall  also  be  retained  by 
the  bank. 

(3)  The  directors  shall  determine  at  what  value  such 
copper  divisional  money  as  is  no  longer  reissued  for  cir- 
culation shall  be  entered  in  the  accounts  of  the  bank. 

§  14.  For  payments  to  the  bank,  and  deposits  therein, 
at  both  head  and  branch  offices,  in  addition  to  coin  of  the 
realm  and  the  notes  of  the  bank,  there  may  be  used  the 
drafts  of  the  head  and  branch  offices,  notes  issued  by 
enskilda  banks  so  far  as  the  directors  may  determine  that 
they  should  be  recognized  as  acceptable,  and,  as  the 
directors  may  approve,  drafts  payable  at  sight  issued  by 
other  financial  institutions. 

The  directors  may  lay  down  rules  in  regard  to  the  ac- 
ceptance of  notes  and  drafts  of  such  institutions. 


178 


The     Swedish     Banking     System 

§  15.  The  head  and  branch  offices  shall  be  open  to  the 
public  on  all  days  except  holy  days  at  hours  to  be  deter- 
mined by  the  directors. 

(c)   Of  bank  post  bills. 

§  1 6.  (i)  The  drafts  which,  in  accordance  with  §  18 
of  the  law  for  the  Bank  of  Sweden  of  the  i2th  May,  1897, 
are  issued  by  the  bank  shall  be  made  out  to  a  named  per- 
son or  order  and  may  not  be  transferred  in  blank. 

(2)  Money  may  be  paid  into  any  of  the  offices  of  the 
bank  and  a  like  sum  be  notified  by  telegram  by  the  office 
where  it  is  received  to  be  paid  to  a  person  designated  at 
any  other  of  the  bank's  offices.  The  paying  office  shall, 
however,  be  entitled,  if  the  payment  in  ready  cash  present 
difficulties,  to  issue  a  bank  post  bill  for  the  amount,  pay- 
able at  the  head  office.  The  directors  are  empowered  to 
issue  special  instructions  fixing  the  commission  and  the 
conditions  generally  which,  with  due  regard  to  the  security 
of  the  bank,  may  be  deemed  proper  for  the  exercise  of 
the  rights  in  question. 

(d)  Of  deposit  and  current  accounts. 

§  17.  The  bank  is  required,  in  accordance  with  the  law 
for  the  Bank  of  Sweden  of  i2th  May,  1897  (§  i6a),  to 
accept  deposits  of  money  free  of  charge  at  its  head  and 
branch  offices,  and  to  repay  the  sums  deposited,  without 
interest,  on  demand  or  at  a  date  fixed  at  the  time  of  mak- 
ing the  deposit.  The  receipt  for  such  deposits  shall  be 
made  out  in  favor  of  a  named  person. 

Such  deposit  receipts  shall  be  delivered  up  when  the 
money  is  withdrawn. 

179 


National    Monetary     Commission 

§  1 8.  (i)  In  accordance  with  the  law  for  the  Bank  of 
Sweden  of  the  i2th  May,  1897  (§  166  and  §  17),  the  bank 
shall— 

At  its  head  and  branch  offices  accept  from  whom- 
soever may  desire  such  a  service  money  to  be  carried  to  a 
ledger  account  on  which  no  commission  shall  be  charged 
or  interest  paid,  and  be  under  obligation  to  repay  the  de- 
positor on  demand  the  amount  standing  to  his  credit. 

Also,  without  payment  of  interest,  accept  payments  on 
account  of  the  Treasury  of  the  State  and  make  payments 
from  the  funds  standing  to  the  credit  of  the  State. 

(2)  For  this  class  of  business  the  following  principal 
rules  shall  apply: 

(a)  Written  notice  shall  be  given  of  the  opening  of  an 
account. 

(b)  Deposits  and  withdrawals  may  be  made  of  sums  of 
any  amount,  fractional  or  other. 

(c)  A  receipt  is  provided  for  deposits,  which  receipt  is 
not  transferable. 

(d)  For  withdrawals  there  may  be  used  either  written 
or  printed  drafts,  or  checks  to  a  named  person  or  order, 
and  these  may  not  be  transferred  in  blank.     The  depos- 
itor shall  be  provided  with  a  book  of  blank  checks  duly 
numbered,  without  charge. 

The  directors  may  notify  other  appropriate  regulations. 

§  19.  In  the  event  of  the  opening,  in  accordance  with 
§  1 6  of  the  law  for  the  Bank  of  Sweden  of  the  i2th  May, 
1897,  of  interest-bearing  current  accounts  with  firms  con- 
ducting a  discount  business  with  the  bank,  and  not  them- 


180 


The     Swedish     Banking     System 

selves  doing  a  banking  business,  the  following  are  the 
principal  rules  which  shall  apply  to  such  business: 

(a)  Deposits  and  withdrawals  may  be  made  of  any 
amounts,  fractional  or  other. 

(6)  A  receipt  is  provided  for  deposits,  which  receipt  is 
not  transferable. 

(c)  For  withdrawals  checks  to  a  named  person  or  order 
are  used.     These  may  not  be  transferred  in  blank.     The 
depositor  is  not  entitled  to  use  other  blank  checks  than 
those  provided  &y  the  bank.     For  these  blank  checks, 
which  shall  bear  an  acknowledgment  of  the  receipt  of  the 
sum  withdrawn,  no  charge  may  be  made. 

(d)  A  check  drawn  on  an  account  is  payable  on  presen- 
tation, provided  that  the  sum  standing  to  the  credit  of  the 
account  is  sufficient  to  meet  the  check. 

(e)  Interest  is  reckoned  on  deposits  beginning  with  the 
first  business  day  after  the  deposit  is  made  and  reckoned 
on  the  highest  multiple  of  100  kronor  in  the  balance  to 
credit  of  the  account. 

(/)  The  directors  determine  the  maximum  of  what  may 
be  accepted  on  any  one  account,  and  the  rate  of  interest, 
which  may  vary  as  between  the  head  office  and  the  dif- 
ferent branch  offices. 

The  directors  may  notify  other  appropriate  regulations. 

(e)  On  the  acceptance  for  safe-keeping  of  gold,  silver,  and 
securities,  and  of  sealed  packets. 

§  20.  (i)  When  in  accordance  with  §  19  of  the  law  for 
the  Bank  of  Sweden  of  the  i2th  May,  1897,  gold  or  silver  in 
coin  or  bars  is  received  for  safe-keeping  at  the  head  office 


181 


National     M  o  n  et  ar  y     Commission 

of  the  bank,  a  receipt  for  the  deposit  shall  be  issued. 
This  receipt,  which  shall  be  made  out  in  favor  of  a  person 
named  therein,  shall  state: 

(a)  The  weight  of  the  gold  or  silver,  whether  coined  or 
uncoined,  and,  further,  in  the  case  of  coin,  the  number 
anti  value  of  each  variety  and,  in  respect  of  bullion,  a 
statement  of  its  fineness,  of  which  the  depositor  is  required 
to  present  a  certificate  from  the  assay  office; 

(6)   Its  estimated  value  in  coin  o£  the  realm ;  and 

(c)  The  bank's  undertaking,  on  presentation  of  the 
receipt  and  payment  of  the  commission  specified  below, 
to  deliver  up  the  deposit,  or,  in  case  that  should  not  be 
possible,  to  pay  the  amount  named  in  the  receipt  in  coin 
of  the  realm. 

(2)  When,  in  accordance  with  the  provision  of  the  law 
cited  in  clause  (i)  the  head  office  of  the  bank  accepts  for 
safe-keeping  bonds,  shares,  or  other  securities  of  the  nature 
which  the  directors  determine,  there  shall  in  like  manner 
be  issued  a  receipt  therefor.  In  such  cases  each  variety 
of  bonds,  shares,  or  other  securities  shall  be  regarded  as  a 
separate  deposit,  and  one  receipt  shall  not  be  made  to 
cover  securities  of  more  than  one  class  and  variety.  In 
general,  the  receipt  shall  specify: 

(a)  The  numbers,  dates  of  issue,  and  amounts,  and  also 
the  series,  running  number,  or  other  identifying   marks, 
and  the  value  placed  on  the  securities,  which  latter  shall, 
as  far  as  possible,  be  determined  in  accordance  with  the 
current  quotations  for  the  securities;  and 

(b)  The  bank's  undertaking  to  deliver  up  the  securities 
deposited  on  presentation  of  the  receipt  and  payment  of  the 


182 


The     Swedish      Banking     System 

commission  specified  below,  or  to  furnish  other  securities  of 
the  same  class,  variety,  and  amount,  or  to  pay  the  value  of 
any  missing  securities  at  the  prices  specified  in  the  receipt. 

(3)  The  commission  payable  for  the  safe-keeping  of 
gold,  silver,  or  securities  shall  be  ?V  per  cent  per  annum 
of  the  value  stated  in  the  deposit  receipt,  fractions  of 
thousands  being  reckoned  as  whole  thousands.  With- 
out regard  to  the  duration  of  the  period  for  which  the 
deposit  is  made,  there  shall  be  paid,  on  making  the 
deposit,  commission  for  at  least  one  year.  The  com- 
mission shall  not  in  any  case  be  less  than  i  krona  per 
annum  for  each  separate  deposit. 

Should  a  depositor  present  for  safe-keeping  securities 
of  the  same  class  and  variety  as  he  has  already  on  deposit 
at  the  bank,  he  may,  on  presenting  his  older  receipt, 
obtain  a  new  receipt  covering  both  the  new  and  the  old 
deposit.  In  this  case  the  commission  charged  on  the  new 
receipt  for  the  unexpired  period  of  the  older  one  shall  be 
reckoned  only  in  proportion  to  the  unexpired  term  and 
for  the  newly  deposited  securities;  it  shall,  however,  not 
be  less  than  i  krona. 

Should  the  deposit  not  be  withdrawn  within  the  period 
for  which  commission  has  been  paid,  it  is  regarded  as 
renewed  for  one  year  on  the  existing  terms.  Should  a 
depositor  withdraw  the  deposit  before  the  expiration  of 
the  period  for  which  commission  has  been  paid,  he  shall 
not  be  entitled  to  recover  any  part  of  the  commission. 
Securities  notified  or  drawn  for  redemption  may,  however, 
be  replaced  by  others  of  the  same  class  and  variety,  and 
these  may  be  substituted  for  an  equal  value  in  redeemed 


183 


National    Monetary     Commission 

securities  without  further  payment  of  commission. 
Should  no  fresh  securities  be  substituted  for  those  re- 
deemed, a  new  receipt  shall  be  issued  for  the  remaining 
securities  and  for  the  unexpired  period  covered  by  the  com- 
mission already  paid  without  extra  charge. 

(4)  In  case  the  directors,  in  accordance  with  the  final 
provision  of  §  1 9  of  the  law  for  the  Bank  of  Sweden  of  the 
1 2th  May,   1897,  have  arranged  for  the  acceptance  for 
safe-keeping  at  the  head  office  of  packages  or  of   other 
movable  property,  an  official  appointed  by  the  directors 
shall  assure  himself  that  the  contents  are  not  of  a  nature 
to  hinder  the  acceptance  of  the  deposit,  and  that  official 
shall,  in  his  office  at  the  bank,  seal  the  deposit  with  the 
seal  of  the  depositor,  and  a  deposit  receipt  shall  be  issued. 
The  receipt,  which  shall  be  in  favor  of  a  person  named  in  it, 
shall  in  general  contain: 

(a)  A  description  of  the  external  appearance  and  cubic 
content  of  the  package;  and 

(b)  The  bank's  undertaking  to  deliver  up  the  goods  with 
the  seal  intact  on  presentation  of  the  receipt  and  payment 
of  the  commission  specified  below,  but  without  liability  on 
the  part  of  the  bank  for  involuntary  injury  or  accident. 

(5)  For  sealed  packages  the  commission  shall  be  reckoned 
in  accordance  with  their  cubic  content  and  the  duration  of 
their  deposit,  so  that  for  each  month  there  shall  be  paid— 

For  packages  with  a  cubic  content —  Kroner. 

Not  exceeding  25  cubic  decimeters 0.50 

Exceeding  25  cubic  decimeters  and  up  to  50  cubic  decimeters,  o.  75 

Exceeding  50  cubic  decimeters  and  up  to  75  cubic  decimeters  __  i.  oo 

Exceeding  75  cubic  decimeters  and  up  to  100  cubic  decimeters,  i.  25 

Exceeding  100  cubic  decimeters  and  up  to  125  cubic  decimeters,  i.  40 

Exceeding  125  cubic  decimeters  and  up  to  150  cubic  decimeters,  i.  55 


184 


The     Swedish      Banking     System 

and  so  on,  rising  by  15  ore  for  each  further  25  cubic  deci- 
meters of  cubic  content  or  part  thereof.  Without  regard 
to  the  period  for  which  the  deposit  is  made,  a  commission 
for  at  least  three  months  shall  be  paid  in  all  cases. 

(6)  In  regard  to  the  deposit    for  safe-keeping  in  the 
bank  of  gold,  silver,  securities,  or  sealed  packages,  the  fol- 
lowing rules  shall  apply: 

If  the  depositor  is  not  satisfied  with  the  bank's  esti- 
mate of  the  value  of  the  gold,  silver,  or  securities,  or  with 
the  measurement  of  packages  or  the  commission  charged, 
the  deposit  shall  not  be  accepted. 

Further,  in  the  case  of  sealed  deposits,  at  least  the  mini- 
mum commission  fixed  as  above  for  each  deposit  shall  be 
paid  at  the  time  of  deposit: 

For  each  month  commenced  commission  shall  be 
charged  as  for  a  complete  month,  and 

Commissions  not  previously  paid  shall  be  payable  at  the 
end  of  each  calendar  year. 

(7)  Any  further  regulations  necessary  for  the  conduct 
at  the  head  office  of  the  business  dealt  with  under  the  pre- 
ceding clauses  (i)  to  (6)  may  be  notified  by  the  directors. 

(8)  Should  the  directors,  in  accordance  with   §   19  of 
the  law  for  the  Bank  of  Sweden  of  the  i2th  May,  1897, 
have  arranged  for  the  receipt  at  any  branch  office,  for  safe- 
keeping, of  gold,  silver,  securities,  or  sealed  packages,  the 
directors   may    prescribe   the   details   of   the  regulations 
which  they  may  deem  necessary  for  conducting  this  class 
of  business,  having  regard  to  the  principles  laid  down 
above. 


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National     Monetary     Commission 

(9)  In  regard  to  the  safe-keeping  for  government  de- 
partments of  securities  or  sealed  packets,  the  directors 
have  power  to  effect  a  special  agreement  with  the  authority 
in  question,  and  commission  may  be  charged  at  a  reduced 
rate  or  be  entirely  remitted. 

Regulations  as  to  the  safe-keeping  at  the  bank  of  bonds 
and  securities  belonging  to  the  postal  savings  bank  and  of 
the  safe-keeping  of  documents  in  connection  with  the 
agreement  between  the  State  on  the  one  side,  and  on  the 
other  the  lyUossavaara-Kiirunavaara  Company  and  others, 
respecting  certain  mineral  properties,  etc.,  are  contained 
in  §  51  below. 

(10)  Notwithstanding  the  regulations  in  the  second  and 
third  of  the  preceding  clauses  as  to  the  form  and  content 
of  deposit  receipts  and  the  redelivery  of  the  valuables, 
the  directors  are  empowered  to  make  such  further  regu- 
lations as  they  may  deem  appropriate  regarding  deposits 
of  large  amount. 

(/)  Of  the  lending  operations  of  the  bank. 

§21.  (i)  [Contains  a  list  of  the  offices  and  of  the 
geographical  limits  within  which  the  business  of  each 
is  to  be  conducted.] 

(2)  Discounts,  loans,  credits,  and  overdrafts  may  not 
be  granted  to  those  not  resident  or  carrying  on  an  es- 
tablished business  in  the  several  lending  districts.  As 
maker,  acceptor,  or  indorser  of  a  bill,  or  as  mortgagee 
or  guarantor,  those  may,  however,  be  accepted  who 
do  not  belong  to  the  district  in  which  discounts,  loans, 
credits,  or  overdrafts  are  applied  for. 


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The     Swedish     Banking     System 

Without  regard  to  the  division  of  the  country  into 
districts,  loans  may  be  made  on  collateral  security  (but 
without  right  to  repay  by  installments)  and  credits  opened 
on  similar  security,  and  also,  at  the  head  office,  over- 
drafts may  be  granted. 

Further,  banking  establishments,  whether  belonging 
to  the  head  office's  district  or  not,  may  be  granted  loan 
facilities  of  all  classes  at  that  office. 

§  22.  In  accord  with  the  provisions  of  §  13  of  the  law 
for  the  Bank  of  Sweden  of  the  I2th  May,  1897,  the  lend- 
ing operations  of  the  bank  comprise — 

(a)  Discount  of  bills  of  exchange. 

(b)  Loans  secured  by  pledge  of  bonds,  shares,  or  other 
securities,  or,  in  particular  cases,  by  the  borrower's  note 
alone. 

(c)  Loans  secured  on  merchandise. 

(d)  The  grant  of  open  and  current  account  credits. 

(e)  The  grant  of  advances  from  the  installment  loan 
fund. 

(a)    DISCOUNT   OF   BIU<S. 

§  23.  (i)  Bills  which  are  discounted  by  the  Bank 
shall  be  drawn  in  Swedish  money,  be  accepted,  and  pay- 
able within  six  months  of  the  date  of  their  offer  for  dis- 
count at  such  places  within  Sweden  as  are  recognized  as 
banking  centers  by  the  directors. 

(2)  Bills  payable  at  a  place  other  than  that  where 
the  acceptor  resides  shall  bear  the  name  of  a  person  or 
firm  resident  in  the  place  of  payment  from  whom  pay- 
ment at  the  due  date  may  be  procured. 


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National    Monetary     Commission 

(b)    LOANS   SECURED   BY   THE   PLEDGE   OF    BONDS,  SHARES,  OR    OTHER    SECU- 
RITIES, OR,  IN  CERTAIN  CASES,  BY  THE  BORROWER'S  NOTE  ALONE. 

§  24.  (i)  Loans  are  granted  against  a  promise  of 
repayment  either  at  a  fixed  date  not  later  than  six  months 
thereafter  or  at  not  more  than  three  months'  notice, 
secured  by  collateral  consisting  of  bonds,  shares,  or 
other  securities.  The  directors  have  the  right  to  de- 
termine what  securities  shall  be  accepted  as  collateral 
and  at  what  quotation  they  shall  be  taken. 

(2)  Municipalities  and  other  associations  of  a  like 
order  and  institutions  may  be  granted  loans  on  the 
above  conditions  of  repayment  without  other  security 
than  their  own  notes. 

(c)    LOANS   ON    MERCHANDISE. 

§  25.  (i)  Loans  are  granted  against  a  promise  of 
repayment  at  a  fixed  date  not  later  than  six  months 
thereafter  secured  by  collateral  consisting  of  merchan- 
dise in  a  public  warehouse,  or  stored  in  the  keeping  of 
a  third  party  who  is  pledged  to  hold  it  or  its  value  at  the 
disposal  of  the  bank  and  is  accepted  as  reliable  for  the 
fulfillment  of  such  a  pledge. 

A  warrant,  in  which  the  goods  are  specified  and  de- 
scribed shall  be  issued  in  favor  of  the  bank  or  assigned 
to  the  bank's  head  office  or  the  branch  office  concerned. 

(2)  The  directors  determine  the  classes  of  goods  on 
which  loans  may  be  made,  and  their  value  as  security, 
and  are  empowered  to  prescribe  such  measures  of  con- 
trol with  regard  to  the  proper  storage  of  the  goods  as 
they  judge  appropriate  and  necessary  for  the  bank's 
security. 


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The     Swedish     Banking     System 

(3)  The  formalities  connected  with  the  release  of  goods 
thus  pledged,  or  any  part  thereof,  shall  be  in  accordance 
with  what  is  prescribed  for  such  cases  or  may  be  pre- 
scribed in  future  by  the  directors. 

(4)  Both  the  directors  and  the  managers  of  the  branch 
concerned,  the  latter  each  for  the  district  assigned  to  that 
branch,  are  entitled  to  cause  goods  pledged  to  the  bank 
and  stored  in  warehouses  or  other  places  of  storage  to  be 
inspected  and  inventories  made  of  them,  as  often  and  in 
such  manner  as  may  be  found  most  convenient  and  neces- 
sary for  the  security  of  the  bank. 

(d)   THE   GRANT   OF    OPEN    AND   CURRENT    ACCOUNT   CREDITS. 

§  26.  (i)  A  credit  shall  be  opened  in  favor  of  the 
national  debt  office  as  prescribed  in  the  law  for  the  Bank 
of  Sweden  of  the  i2th  May,  1897,  §  14. 

(2)  In  general  credits  may  be  opened  on  the  security 
of  bonds,  shares,  or  mortgages  on  real  estate,  and  also 
secured  by  guarantors,  after  the  consideration  of  appli- 
cations for  such  credits  by  the  branch  managers  con- 
cerned   or,    when    that    is    specially    prescribed,    by   the 
directors,  who  shall  decide  on  such  applications. 

(3)  Credits  shall  not  be  granted  for  a  longer  term  than 
twelve  months. 

(4)  The   commission   to   be   charged   is   fixed   by   the 
directors  and  may  be  different  for  different  cases. 

(5)  Withdrawals  and  deposits  may  be  made  in  any 
amounts,    even    or    otherwise.     Interest    is    charged    on 
amounts  advanced  from  and  with  the  day  on  which  the 
advance  is  made.     If  the  amount  outstanding  be  not  an 
exact  multiple  of  10  kronor,  interest  shall  be  charged  on 

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National     Monetary     Commission 

the   lowest   multiple   of    10   kroner    which   exceeds   the 
amount  outstanding. 

(6)  For  withdrawals  there  may  be  used  either  written 
drafts,  made  out  in  favor  of  a  named  person,  or  checks  to 
a  named  person  or  order,  and  these  may  not  be  transferred 
in  blank.     The  borrower  may  not   make  use  of  other 
check  forms  for  this  purpose  than  those  supplied  to  him 
by  the  bank.     For    these  blank    checks,   on    which  an 
acknowledgment  of  receipt  shall  be  written,  no  charge 
shall  be  made. 

(7)  A  borrower  who,  at  the  expiration  of  the  period  for 
which  the  credit  was  granted,  has  been  accorded  a  new 
credit  to  run  from  that  date,  is  entitled  to  have  any  bal- 
ance due  from  him  at  the  expiration  of  the  former  credit 
transferred  to  the  new  account,  so  far  as  such  balance  does 
not  exceed  the  amount  of  the  newly  opened  credit. 

(8)  Current     account     credits     (overdrafts)     may     be 
granted  by  the  directors  for  terms  not  exceeding  twelve 
months,  and  secured  by  the  same  classes  of  collateral  as 
are  prescribed  for  open  credits,  and  in  general  on  such 
terms  as  the  directors  prescribe,  but  no  commission  shall 
be  chargeable  on  such  credits. 

(9)  The  aggregate  amount  of  such  credits  as  may  be 
granted  by  the  bank  under  clause  (2)  above,  and  of  over- 
drafts, shall  be  limited,  as  prescribed  in  the  law  for  the 
Bank  of  Sweden  of  the  i2th  May,  1897  (§  i3d),  so  as  not  to 
exceed  15,000,000  kronor. 

(e)  GRANT  OF  LOANS  FROM  THU  INSTALLMENT  LOAN  FUND. 

§  27.   (i)   Installment  loans  are  granted  against  the  note 
of  the  borrower,  with  either  collateral  security  consisting 

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The     Swedish     Banking     System 

of  bonds,  shares,  or  mortgages  on  real  estate,  or  with  per- 
sonal guaranties. 

(2)  Such  loans  shall  be  repaid  by  the  discharge  in  each 
sixth  month  from  the  date  of  borrowing,  of  at  least  one- 
tenth   part   of  the   amount   lent   together   with   interest 
accrued,  subject  to  the  entire  amount  of  the  outstanding 
part  of  the  loan  becoming  due  in  case  of  failure  to  make 
such  payments  when  due. 

(3)  Advances  are  not  made  in  less  amounts  than  300 
kronor. 

(4)  In  the  case  of  loans  secured  on  personal  guaranty, 
the  borrower  is  required,  at  the  date  for  the  payment  of 
each  installment,  should  it  be  demanded,  to  furnish  evi- 
dence of  his  own   and  his  guarantors'   continued  trust- 
worthiness, or  to  provide  new  security  which  is  acceptable. 
The  consequence  of  failure  to  do  so  shall  be  that  the  entire 
outstanding  amount  of  the  loan  shall  become  due  at  once. 

(5)  No  borrower  may  secure  advances  of  more  than 
6,000  kronor  at  one  time. 

(6)  Other  regulations  which  may  be  regarded  as  requi- 
site for  the  security  of  the  bank  in  regard  to  this  class  of 
advances  may  be  notified  by  the  directors. 

(7)  Should   applications   be   received   at   the   head   or 
branch  offices  for  loans  of  this  class  to  an  aggregate  amount 
exceeding  the  available  funds,  the  applications  shall  be 
dealt  with  in  the  order  in  which  they  are  received. 

Special  regulations  applicable  to  loans  and  discounts. 

§  28.  The  folio  wing  special  regulations  shall  apply  to  the 
entire  lending  operations  of  the  bank: 


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National     M  o  n  et  ar  y     Commission 

(1)  Discounts,  loans,  credits,  or  overdrafts  may  not  be 
granted — 

(a)  To  directors  of  the  bank  and  members  of  the  man- 
aging committees  of  its  branches,  except  that  they  may 
obtain  loans  secured  on  merchandise  stored  in  a  public 
warehouse  or  on  the  bonds  of  the  State  or  of  the  general 
mortgage  bank  or  mortgage  associations,  and  may  have 
credits  opened  in  their  favor  on  the  security  of  the  bonds 
named. 

(b)  To  officials  and  clerks  in  the  head  or  branch  offices 
of  the  bank,  except  that  such  officials  and  clerks  may  be 
granted,  by  the  head  office  or  the  branch  office  concerned, 
a  loan  or  credit  on  the  security  of  bonds  of  the  State,  or 
of  the  general  mortgage  bank,  mortgage  associations,  or 
municipalities. 

(2)  Loans,  credits .  and  overdrafts  may  not  be  granted 
on  the  security  of  the  personal  guaranty  of  a  director,  a 
member  of  a  branch   managing  committee,   official,   or 
clerk  in  the  bank,  and  no  bill  of  exchange  bearing  the 
name  of  a  director,  member  of  a  branch  managing  com- 
mittee, official  or  clerk  in  the  bank,  as  drawer,  acceptor, 
or  last  indorser,  may  be  discounted  at  the  bank. 

(Cf.  §  15  of  the  law  for  the  Bank  of  Sweden  of  the  i2th 
May,  1897.) 

(3)  The  loans  to  which  §§  24,  25,  and  27  apply  are 
granted  in  multiples  of  10  kronor. 

§  29.  (i)  The  note  of  a  borrower  who  secures  a  loan, 
open  credit,  or  credit  on  current  account,  shall,  in  case  the 
borrower's  or  his  guarantor's  trustworthiness  is  not 
known  to  the  management,  or  the  collateral  offered  does 


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The     Swedish     Banking     System 

not  appear  in  itself  to  furnish  ample  security,  be  accom- 
panied by  a  certificate  relating  to  their  trustworthiness 
signed  by  a  civil  servant,  public  official,  or  private  person 
on  whom  the  management  can  place  complete  reliance. 

Independently  of  this,  it  is  the  duty  of  the  management, 
in  the  case  of  each  application  for  the  discount  of  bills, 
loan,  open  credit,  or  credit  on  current  account,  to  exam- 
ine into  the  acceptability  of  the  security  offered  and  to 
exercise  care  that  the  security  of  the  Bank  is  in  every  case 
properly  provided  for.  The  management  may  not  neglect, 
with  a  view  to  this  end,  to  procure  all  the  information 
which  might  influence  judgment  of  the  position  of  debtors 
and  their  capacity  to  meet  the  obligations  into  which  they 
have  entered. 

In  particular,  in  the  discount  of  bills  regard  shall  be  had 
to  the  origin  of  the  bills. 

(2)  In  case  a  borrower,  mortgagor,  or  guarantor  be  un- 
able to  write,  or  in  case  their  signatures  be  not  known  to 
the  management,  these  shall,  in  every  instance,  be  certified 
by  two  trustworthy  men,  in  the  former  case  as  witnesses 
by  their  signatures  to  the  contract  made,  in  the  latter  to 
the  identity  of  the  signatures. 

§  30.  (i)  The  public  is  entitled  to  conduct  business  re- 
lating to  lending  and  borrowing  at  the  head  and  branch 
offices  of  the  bank  in  writing.  All  the  requisites  provided 
at  the  bank's  offices  are  placed  at  the  disposal  of  clients 
free  of  charge,  under  such  restrictions  and  conditions  as  the 
directors  prescribe. 

(2)  The  prohibition  contained  in  §  35  of  the  law  for  the 
Bank  of  Sweden  of  the  i2th  May,  1897,  of  directors  or 

22150 — 10 13  193 


National     Monetary     Commission 

members  of  branch  managing  committees  from  taking,  in 
the  capacity  of  agents  for  others,  any  decision  in  regard  to 
discounting  bills  or  provision  of  loans  or  credits  at  the 
head  or  branch  offices,  shall  also  apply  to  the  clerical  staff 
at  the  head  and  branch  offices  of  the  bank. 

Should  a  director  offend  against  this  rule,  information 
thereof  shall  be  given  to  the  chief  law  officer  of  the  Parlia- 
ment, who  shall  institute  proceedings  in  accordance  with 
the  law  relating  to  the  liability  of  directors. 

Should  a  member  of  a  branch  managing  committee 
offend  against  the  rule,  the  circumstances  shall  be  notified 
to  the  directors,  who,  in  the  question  of  legal  action,  are 
empowered  to  proceed  in  accordance  with  the  special  law 
on  the  subject  of  the  liability  of  these  branch  managers. 

Should  a  member  of  the  clerical  staff  offend  against  the 
rule  in  question,  the  matter  shall  be  reported  to  the  di- 
rectors or  the  managing  committee  concerned,  who  are 
empowered  to  dismiss  the  offender  or  to  suspend  him  for 
a  fixed  period  of  not  less  than  six  months  from  his  func- 
tions and  emoluments. 

§  31.  (i)  The  rate  of  interest  charged  on  loans,  credits, 
overdrafts,  and  the  rate  of  discount  on  bills  of  exchange 
shall  be  fixed  by  the  directors  with  due  regard  both  to  the 
financial  situation,  to  the  period  of  the  loan,  and  to  the 
security  offered.  These  rates  may  be  different  at  the 
head  and  branch  offices  of  the  bank. 

(2)  On  loans  and  advances  which  are  not  repaid  on  or 
before  the  due  date,  there  shall  be  charged,  from  that  date, 
interest  at  the  rate  of  6  per  cent  per  annum,  unless  the  rate 
stipulated  on  the  advance  be  higher  than  this,  in  which 


194 


The     Swedish     Banking     System 

case  interest  shall  continue  to  be  reckoned  at  that  higher 
rate  until  the  repayment  is  completed. 

§  32.  The  head  and  branch  offices  of  the  bank  shall  be 
open  for  the  making  of  loans  and  advances  on  every  busi- 
ness day  in  the  week. 

§  33.  The  bank's  head  and  branch  offices  are,  in  accord- 
ance with  the  terms  of  the  royal  decree  of  April  18,  1681, 
to  secure  the  aid  of  the  officers  of  the  Crown  both  in  Stock- 
holm and  throughout  the  country  in  the  prompt  execution 
of  the  legal  proceedings  for  recovery  arising  out  of  the 
lending  business  of  those  offices,  and  it  is  the  duty  of  those 
officers,  on  the  conclusion  of  the  proceedings,  to  forward 
the  amounts  recovered  on  claims  without  delay  to  the  head 
or  branch  office  concerned. 

§  34.  The  bonds  issued  by  the  bank  before  the  year  1830 
as  a  means  of  procuring  funds  may  not  be  accepted  as 
collateral  for  loans,  but  the  bank  will  redeem  on  demand 
such  of  those  bonds  as  are  not  by  express  stipulation  per- 
petual. 

§  35.  The  provisions  regarding  special  rates  of  discount, 
and  special  advantages  as  to  loans  and  credits,  in  favor  of 
Enskilda  banks  are  contained  in  the  law  for  the  Bank  of 
Sweden,  transitional  provisions.  (§  41.) 

PART  3.— OF    THE    ADMINISTRATIVE    OFFICERS 
OF  THE  BANK  AND   THEIR  DUTIES. 

§  36.  (i)  In  accordance  with  §  72  of  the  constitution 
and  §  71  of  the  standing  orders  of  the  Parliament,  the  bank 
is  managed  by  seven  directors. 

The  chairman,  who  may  not  hold  any  other  office  in  the 
bank's  administration,  receives  from  the  funds  of  the  bank 

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National    Monetary     Commission 

a  yearly  salary  equal  in  amount  to  that  which  each  of  the 
other  directors  is  entitled  to  receive  as  director  in  accord- 
ance with  the  scale  of  salaries  fixed  for  officers  of  the  bank. 

(2)  In  accordance  with  §  72  of  the  constitution  and  §  73 
of  the  standing  orders  of  the  Parliament,  four  substitutes 
for  the  directors  are  appointed,  one  by  the  King  and  three 
by  the  Parliament. 

(3)  In  the  manner  prescribed  in  §  71  of  the  standing 
orders  of  the  Parliament,  the  directors  themselves  elect  a 
vice-chairman  from  among  themselves  to  preside  when 
the  chairman  is  prevented  from  attending. 

(4)  If  the  number  of  directors  available  be  not  as  great 
as  is  required  for  the  conclusion  of  the  business  in  hand 
in  accordance  with  later  regulations,  one  of  the  substitutes 
appointed  by  the  Parliament  shall  be  summoned  to  attend. 

The  substitute  appointed  by  the  King  is  summoned 
when  the  chairman  has  notified  his  inability  to  be  present. 

(5)  When  a  director  is  prohibited  from  acting  as  such 
by  the  terms  of  §  29  and  §  30  of  the  law  for  the  Bank  of 
Sweden  of  the  i2th  of  May,  1897,  he  shall  withdraw  and 
in  his  place  one  of  the  substitutes  shall  be  summoned. 

§  37.  In  the  conduct  of  the  business  of  the  bank  the 
directors  are  required  to  observe  both  the  laws  of  the 
realm  and  the  special  laws,  regulations,  and  ordinances 
relating  to  the  bank. 

§  38.  (i)  The  directors  elect  from  their  number  three 
managers,  one  principal  and  two  others,  whose  duty  it 
shall  be,  in  accordance  with  the  regulations  of  the  bank 
and  the  instructions  given  by  the  directors,  and  in  general 
in  accordance  with  the  division  of  functions  between 


196 


The     Swedish     Banking     System 

them,  to  present  the  business  for  the  consideration  of  the 
directors,  to  supervise  the  carrying  out  of  the  decisions 
of  the  directors,  to  conduct  the  purchase  and  sale  of  foreign 
bills  of  exchange  and  make  the  arrangements  necessary 
in  that  connection,  to  supervise  the  internal  organization 
of  the  bank,  and  in  general  to  conduct  the  current  business 
of  its  administration. 

(2)  The  managers  are  each  entitled  to  one  and  a  half 
month's  vacation  yearly. 

(3)  The  directors  elect,  also  from  their  own  number, 
one  director  who  shall,  in  accordance  with  the  instructions 
given,  supervise  the  conduct  of  the  bank's  paper  mill  and 
printing  works,  and  bring  before  the  directors  the  business 
relating  to  the  mill  and  printing  works. 

The  director  selected  for  this  function  need  not  be  one 
of  the  managers,  though  one  of  these  may  be  so  selected. 

(4)  The  salaries  assigned  to  the  directors  and  the  mana- 
gers, and  to  the  director  who  supervises  the  paper  mill 
and  printing  works,  are  specified  in  the  scale  of  salaries 
fixed  for  officers  of  the  bank. 

(5)  When,  in  accordance  with  the  rights  assigned  them 
in  clause  (2)  above,  one  of  the  managers  takes  a  vacation, 
and  in  consequence*  thereof  or  by  the  instructions  of  the 
directors  one  of  the  substitutes  is  summoned  to  take  part 
in  the  administration  of  the  bank,   the  latter  shall  be 
entitled  to  receive  from  the  funds  of  the  bank  a  payment 
at  the  same  rate  as  is  assigned  to  a  director  for  the  time 
during  which  he  serves. 

(6)  Should   a   manager   be   absent  on  vacation   or   be 
engaged  on  the  business  of  the  bank  at  a  distance  from 


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National    Monetary     Commission 

the  head  office,  and  the  directors  find  it  desirable  to 
appoint  a  special  deputy  manager,  the  latter  shall  be 
entitled  to  receive  from  the  funds  of  the  bank  for  the 
period  of  such  service  a  payment  at  the  rate  assigned  for 
managers  in  the  scale  of  salaries. 

(7)  When,  in  the  absence  of  the  chairman,  the  substi- 
tute appointed  by  the  King  is  called  upon  to  serve,  pay- 
ment shall  be  made  to  him  from  the  bank's  funds  on  the 
same  scale  as  is  fixed  for  the  chairman,  but  not  for  an 
aggregate  period  of  more  than  one  month  and  a  half  in 
each  year,  not  including,  however,  in  this  period  any  time 
during  which  the  chairman  may  have  been  absent  on  the 
business  of  the  bank. 

§  39.  (i)  For  the  conduct  of  ordinary  business  the 
directors  shall  meet  once  each  week,  or  oftener  if  the  nature 
and  pressure  of  business  require  it,  and  at  such  meetings 
at  least  five  directors  shall  be  present.  Business  which 
requires  immediate  dispatch  may,  however,  be  done  when 
only  four  directors  are  present,  in  case  three  of  them  are 
in  agreement  thereon,  but  in  meetings  with  the  directors 
of  the  national  debt  office  at  least  five  directors  of  the 
bank  shall  take  part. 

Should  there  be  a  divergence  of  opinions  between  the 
directors,  the  votes  of  the  directors  shall  be  recorded,  each 
being  entitled  to  one  vote.  In  cases  in  which  the  votes 
are  equal,  the  chairman  has  the  right  to  give  a  casting 
vote.  Anyone  whose  vote  is  not  on  record  is  regarded 
as  assenting  to  the  decision  of  the  majority,  and  a  director 
who  may  be  prevented  for  any  reason  from  being  present 
when  any  decision  is  taken  is  not  thereby  disqualified 


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The     Swedish     Banking     System 

from  joining  in  further  discussions  in  regard  to  the  same 
matter  which  may  arise.  Only  in  the  case  of  elections 
to  offices  to  which  some  one  of  the  directors  might  be 
appointed  shall  votes  be  given  by  secret  ballot. 

Measures  taken  in  the  name  of  the  directors  may  not 
be  so  taken  except  in  consequence  of  a  decision  of  a  meeting 
of  the  directors. 

(2)  At  least  four  directors  are  required  to  go  over  the 
business  relating  to  loans  on  every  ordinary  week  day. 

§  40.  In  respect  to  the  classes  of  business  which  are 
required  to  be  kept  secret,  and  to  the  obligation  of  direc- 
tors, members  of  branch  managing  committees,  auditors 
and  clerks  to  maintain  secrecy  in  regard  to  the  relations 
between  clients  and  the  bank,  and  other  confidential  mat- 
ters, the  provisions  of  the  law  for  the  Bank  of  Sweden  of 
1 2th  May,  1897  (§§36  and  37)  apply. 

§  41.  (i)  It  is  the  duty  of  the  directors  to  see  that  gold 
received  at  the  royal  mint  for  account  of  the  bank  for 
coining  or  other  purposes  is  brought  into  account  as 
speedily  as  may  be,  by  delivery  to  the  bank  either  as  coin 
or  in  bars.  Bar  gold  shall  be  entered  in  the  bank's 
accounts  at  its  coinage  value  without  deduction  for  cost 
of  mintage. 

(2)  Bar  silver  is  entered  in  the  accounts  at  such  value 
as  the  directors  may  decide  in  the  circumstances  of  the 
case. 

(3)  The  directors  shall,  when  the  royal  mint  has  gold 
or  silver  in  its  possession  for  account  of  the  bank,  be  rep- 
resented by  one  of  the  managers  at  the  annual  inspection 
which  takes  place  in  the  month  of  January  in  each  year, 


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National    Monetary     Commission 

or  more  frequently  if  necessary,  in  the  manner  which  the 
King  ordains.  Should  there  be  found  anything  in  con- 
nection with  such  an  inventory  which  calls  for  report,  the 
directors  may  send  a  statement  thereon  to  the  King. 

§  42.  At  least  once  in  each  year  the  directors  shall 
cause  an  inspection  to  be  made  of  all  the  safes  and  other 
storage  places  at  the  head  office,  and  also  cause  the  prem- 
ises and  equipment  of  the  bank  in  Stockholm  to  be 
inspected. 

§  43.  (i)  The  directors  are  empowered  to  grant  an 
extension  of  time  to  debtors  of  the  bank  for  the  payment 
of  their  debts  to  the  bank,  after  careful  consideration  of 
the  circumstances  in  each  individual  case,  and  to  accept 
a  composition  towards  the  liquidation  of  debts  to  the  bank 
in  the  case  of  such  of  the  bank's  debtors  as  may  have 
assigned  all  their  property  for  the  benefit  of  creditors. 
In' no  other  cases  than  the  last  named,  however,  may  the 
directors  remit  anything  of  what  should  be  paid  in  ac- 
cordance with  agreements  made  and  the  ordinances  in 
force,  but  all  questions  regarding  remission  of  what  is  due 
shall  be  submitted  to  the  next  parliamentary  committee 
on  banking  for  decision  in  the  order  required  by  the 
instructions  given  to  that  committee. 

(2)  The  directors  have  power  to  decide,  both  for  the 
head  office  and,  on  the  advice  of  the  branch  managing 
committees  concerned,  for  branch  offices,  what  shall  be 
written  off  as  doubtful  debts  in  the  accounts. 

§  44.  The  directors  shall  make  a  report  on  complaints 
communicated  to  the  parliamentary  committee  on  bank- 
ing or  to  the  auditors,  and  on  applications  to  the  com- 


200 


The     Swedish      Banking     System 

mittee  which  may  be  forwarded  to  the  directors  in  proper 
time. 

§  45.  The  directors  are  entitled  at  any  time  to  delegate 
a  representative,  whether  one  of  themselves  or  not,  to 
inspect  the  branch  offices. 

When  such  a  duty  is  undertaken  by  one  of  the  directors, 
no  special  remuneration  is  assigned  in  that  regard,  but 
traveling  and  maintenance  expenses  are  allowed  at  the 
rates  fixed  in  the  current  regulations.  Other  persons  un- 
dertaking this  duty  are  assigned  remuneration  as  the 
directors  may  determine. 

§  46.  (i)  The  directors  are  intrusted  with  the  payment 
out  of  the  funds  of  the  bank  of — 

(1)  The  assigned  contributions  to  the  various  orphan- 
ages in  the  Kingdom. 

(ii)  The  subscription  to  the  widows'  and  orphans' 
funds  at  the  head  and  branch  offices  of  the  bank  and  at  the 
paper  mill. 

(iii)  Assistance  to  those  persons  who  formerly  received 
Christmas  gifts  and  continue  to  be  in  need  of  them  to  the 
same  amount  as  has  been  customary. 

(iv)  The  fixed  yearly  payments  which  the  Parliament 
has  granted  to  certain  persons  still  living. 

(v)  Remuneration  for  the  continuance  of  the  record  of 
the  bank's  transactions. 

The  directors  shall  notify  the  banking  committee  of 
alterations  in  these  respective  payments. 

(2)  In  case  of  imitation  or  falsification  of  the  bank's 
notes,  and  of  the  uttering  of  such  imitated  or  falsified  notes, 
the  directors  are  empowered  to  offer  and  to  pay  out  of  the 


201 


National    M  o  n  et  ar  y     Commission 

funds  of  the  bank  such  rewards  as  they  may  judge  expe- 
dient in  the  circumstances  of  the  case. 

§  47.  [Deals  with  the  management  of  the  paper  mill.] 

§  48.  Real  estate  owned  by  the  bank,  with  the  exception 
of  such  as  may  have  been  bought  in  for  the  protection  of 
liens  held  on  the  property  by  the  bank,  may  not  be  dis- 
posed of  by  the  directors  without  the  assent  of  the 
Parliament. 

§  49.  In  accordance  with  the  provisions  of  §  32  of  the  law 
for  the  Bank  of  Sweden  of  the  i2th  May,  1897,  the  direct- 
ors shall  make  to  the  banking  committee  of  the  Parlia- 
ment each  year  a  report  on  the  financial  situation,  busi- 
ness, and  administration  of  the  bank.  This  report  shall 
be  printed  and  be  made  accessible  to  the  public. 

In  addition  the  directors  are  required  to  report  on  the 
matters  specified  to  the  official  parliamentary  auditors 
of  the  treasury,  riksbank,  and  national  debt  office. 

With  these  reports  the  directors  shall  forward  to  the 
banking  committee  and  to  the  auditors  the  reports  re- 
quired from  the  managing  committees  of  branch  offices, 
and  shall  also  send  to  the  auditors  the  reports  received 
from  the  auditors  of  the  branches,  accompanied  by  such 
information  and  explanation  as  may  be  called  for  by  the 
matter  contained  in  the  latter  reports  or  by  conditions 
to  which  attention  is  called  in  them. 

The  directors  shall  cause  the  report  on  the  bank  as  a 
whole  which,  by  the  existing  rules,  is  to  be  made  by  the 
auditors  of  the  Parliament  for  each  year,  to  be  printed, 
published,  and  forwarded  to  the  Parliament,  together 
with  the  statements  and  explanations  to  which  it  may 
give  rise. 


202 


The      Swedish      Banking     System 

§  50.  The  directors  shall  at  all  times  be  prepared  with 
arrangements  by  which  the  bank's  cash,  securities,  and 
documents  may  be  able  to  be  transferred  without  loss  of 
time  to  a  safe  place  in  case  of  necessity.  The  directors 
shall  seek  advice  and  information  in  such  circumstances 
of  the  King. 

§  51.  (i)  It  is  the  duty  of  the  bank  directors  who  are 
appointed  by  the  Parliament— 

In  accordance  with  §  50  of  the  constitution,  jointly  with 
the  directors  of  the  national  debt  office,  to  confer  with  the 
King  in  regard  to  the  selection  of  a  place  for  the  meeting 
of  Parliament,  in  case  serious  obstacles  should  prevent  its 
meeting  in  the  capital. 

In  accordance  with  §  98  of  the  constitution,  in  the  event 
of  the  death  or  resignation  of  the  chief  law  officer  of  the 
Parliament,  in  association  with  the  directors  of  the 
national  debt  office,  to  induct  into  the  office  the  person 
selected  as  his  successor  by  the  Parliament,  and,  in  the 
event  of  the  appointment  as  chief  law  officer  of  the  person 
selected  as  successor  to  that  office  by  the  Parliament,  or 
of  his  death  or  resignation  of  the  right  to  succeed  to  the 
office,  they  shall,  in  association  with  the  directors  of  the 
national  debt  office,  proceed  to  the  election  of  another. 

In  accordance  with  §  109  of  the  constitution,  in  the 
event  of  the  grant  of  money  by  the  Parliament,  without 
an  agreement  being  reached  before  the  close  of  the  Par- 
liamentary session  as  to  the  mode  of  raising  the  money, 
then  in  association  with  the  directors  of  the  national  debt 
office,  to  prepare  and  issue  a  new  draft  of  ways  and  means 
on  the  basis  that  the  items  in  the  current  scheme  of  ways 


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National    M on  et ar y     Commission 

and  means  shall  be  increased  or  decreased  uniformly  in  the 
proportion  of  the  sum  actually  granted  to  that  contained  in 
the  financial  arrangements  of  the  preceding  Parliament. 

In  accordance  with  §  32  of  the  constitution,  to  assist 
by  the  attendance  of  three  delegates  at  the  consideration 
by  each  new  Parliament  of  those  formal  powers  of  attorney 
which  shall  confirm  the  authority  of  the  directors. 

(2)  In  accordance  with  the  royal  ordinance  regarding 
a  postal  savings  bank  for  the  Kingdom,  the  directors  are 
entitled  to  select  one  of  their  number  to  be  a  member 
of  the  Administrative  Board  of  the  postal  savings  bank; 
to  arrange  for  the  safe-keeping  by  the  bank  on  behalf  of 
the  postal  savings  bank  of  the  bonds  and  other  valuable 
documents  belonging  to  the  postal  savings  bank,  on  pay- 
ment to  the  bank  of  the  commission  fixed  by  the  directors, 
and  on  the  request  of  the  Administrative  Board  of  the  pos- 
tal savings  bank,  to  arrange  for  the  sale  or  pledge  of  such 
valuable  documents,  the  property  of  the  postal  savings 
bank,  as  its  Administrative  Board  may  deem  necessary. 

On  the  basis  of  the  agreement  approved  by  the  Parlia- 
ment of  1907  between  the  Swedish  Government  on  the 
one  side  and  on  the  other  the  Luossavaara-Kiirunavaara 
Company,  theGellivare  Iron  Ore  Fields  Company,  and  the 
Grangesberg-Oxelosund  Transportation  Company,  respect- 
ing certain  quarries,  etc.,  the  directors  are  to  receive  and 
preserve  the  documents  referred  to  in  that  agreement, 
without  charge  for  the  service,  and  in  accordance  with  the 
said  agreement  conduct  the  business  involved. 

(3)  In  association  with  the  directors  of  the  national 
debt  office,  the  bank  directors  shall  further — 


204 


The     Swedish     Banking     System 

(a)  Select  and  appoint  a  person  to  be  a  member  of  the 
board  of  directors  of  the  Gotha  Canal  on  behalf  of  the  bank 
and  the  national  debt  office,  in  order  to  secure  the  future 
supervision  and  control  over  the  maintenance  of  the  canal. 
A  new  appointment  shall  be  made  each  year,  but  the  pre- 
vious representative  may  be  reappointed; 

(6)  Select  a  representative  to  take  part  in  the  audit  of 
the  canal  company's  accounts  on  behalf  of  the  Bank  and 
the  national  debt  office;  and 

(c)  Take  the  necessary  measures  for  carrying  out  the 
decision  of  the  Parliament  in  the  matter  of  new  buildings 
for  the  Parliament,  etc.,  and  the  Bank;  these  shall  be  in 
accordance  with  the  more  detailed  provisions  of  the  in- 
structions of  the  Parliament  under  dates  the  nth  and  i2th 
May,  1888,  and  the  6th  April,  1906. 

PART  4.— OF  THE  MANAGEMENT  OF  THE  BRANCH 
OFFICES  OF  THE  BANK. 

§  52.  (i)  The  managing  committees  of  each  of  the 
branch  offices  in  Gothenburg  and  Malmo  shall  be  com- 
posed of  four  members  and  that  of  each  of  the  other 
branch  offices  of  three  members.  All  these,  and  the  requi- 
site number  of  substitutes,  appointed  for  one  calendar 
year  at  a  time,  shall  be  chosen  by  the  directors,  who  shall 
have  the  right  to  remove  one  or  more  such  officers  from 
their  appointments  when  they  find  occasion  to  do  so;  in 
the  place  of  officers  so  removed,  others  shall  be  at  once 
appointed. 

Should  a  member  of  a  branch  committee  cease  to  serve 
for  any  other  reason  before  the  end  of  the  period  for  which 


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National    Monetary     Commission 

he  was  appointed,  a  new  member  shall  be  appointed  to 
take  part  in  the  work  of  the  committee  for  the  remainder 
of  the  period.  On  the  annual  occasions  of  the  appoint- 
ment of  the  committees,  retiring  members  may  be  reap- 
pointed. 

(2)  The  directors  shall  choose  from  among  the  members 
of  each  branch  committee  one  member  to  act  as  manager 
and  conduct  the  daily  work  of  the  management,  but  the 
chairmen  and  vice-chairmen  shall  be  elected  by  the  com- 
mittees themselves  from  their  own  number. 

(3)  In  the  case  of  an  ordinary  member  of  a  branch  com- 
mittee being  accidentally  prevented  from  serving,  one  of 
the  substitutes  shall  be  summoned. 

Should  the  member  who  acts  as  manager  be  prevented 
from  performing  his  functions,  the  committee  shall  arrange 
for  the  carrying  on  of  the  work  until  the  directors  have 
decided  on  the  arrangements  to  be  made. 

(4)  At  the  time  determined  by  the  directors  on  repre- 
sentations made  to  them  on  the  subject,  and  when  they 
have  arranged  for  the  due  conduct  of   the  affairs  of  the 
branch,  the  managing  member  of  the  committee  is  entitled 
to  a  yearly  vacation: 

In  the  case  of  the  branches  at  Gothenburg  and  Malmo 
for  one  month  and  a  half. 

In  the  case  of  other  branches  for  one  month,  but  from 
and  with  the  sixth  year  after  his  appointment  as  manager, 
for  one  month  and  a  half. 

Other  ordinary  members  of  the  committees  of  all 
branches,  with  the  exception  of  those  at  Gothenburg  and 


206 


Swedish     Banking     System 

Malmo,  are  entitled  in  like  manner,  after  due  notice  to 
the  committee  concerned  and  in  case  no  special  obstacle 
exist  to  such  a  course,  to  holidays  at  the  charge  of  the 
bank,  amounting  for  each  of  them  to  not  more  than  one 
month  in  the  aggregate  in  each  year. 

§  53.  In  the  conduct  of  the  branch  offices  the  commit- 
tees are  required  to  observe  not  only  the  law,  regulations, 
and  ordinances  applying  to  the  bank,  but  also  the  in- 
structions issued,  or  which  may  be  issued,  by  the  directors 
as  a  whole  or  by  the  managing  directors. 

§  54.  It  is  the  duty  of  the  managing  member  of  a  branch 
committee  to  supervise  carefully  the  conduct  of  affairs  at 
the  branch,  to  present  to  the  committee  the  business 
relating  to  loans  and  other  matters,  and  to  conduct  the 
correspondence  between  the  branch  office  and  the  head 
office,  the  whole  in  accordance  with  the !  instructions 
issued,  or  which  may  be  issued,  by  the  directors  as  a 
whole  or  by  the  managing  directors. 

§  55.  (i)  The  branch  committees  meet  for  the  con- 
sideration of  general  business  once  in  each  month,  or 
more,  frequently  if  the  nature  and  pressure  of  business 
so  require,  and  at  such  meetings  all  the  members  of  the 
committee  are  required  to  be  present.  At  the  meetings, 
a  record  of  whose  proceedings  shall  be  kept,  in  case  of 
differences  of  opinion,  the  majority  of  votes  shall  prevail, 
and,  in  case  of  equality  of  votes,  the  chairman  is  entitled 
to  give  the  casting  vote. 

(2)  For  the  consideration  of  business  relating  to  loans 
and  advances,  the  committees  meet  every  ordinary  week 


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National    Monetary     Commission 

day.  No  decisions  may  be  reached  unless  three  members 
are  present,  and  no  application  for  a  loan  may  be  approved 
unless  three  members  of  the  committee  are  agreed  thereon. 

§  56.  (i)  The  accounts  and  administration  of  each 
branch  office  shall  be  inspected  yearly  by  four  persons 
who,  as  well  as  an  equal  number  of  substitutes,  are 
selected  by  a  nominating  committee  composed  of  forty 
members.  These  latter  shall  be  appointed  in  a  manner 
identical  with  that  prescribed  in  §  71  of  the  standing 
orders  of  the  Parliament  for  the  committee  charged  with 
the  appointment  of  the  directors  of  the  bank  and  of  the 
national  debt  office. 

(2)  The  branch  committees  shall  report  to  the  aud- 
itors referred  to  (clause  i)  when  they  meet,  such  report 
to  cover  the  lending  operations  and  the  connected  super- 
vision and  proceedings  for  recovery  of  debts;  and  also 
to  the  banking  committee  of  the  Parliament  and  the 
official  parliamentary  auditors  of  the  treasury,  riksbank, 
and  national  debt  office,  this  report  to  cover  the  business 
of  the  branch  as  a  whole.  These  reports  are  required 
to  be  forwarded  to  the  directors,  that  to  the  banking 
committee  not  later  than  the  day  previous  to  the  opening 
of  the  Parliament,  that  to  the  parliamentary  auditors  at 
least  fourteen  days  before  their  meeting. 

§  57.  (i)  The  salaries  assigned  to  the  members  of 
branch  managing  committees  are  specified  in  the  salary 
scale  fixed  by  the  Parliament. 

(2)  So  long  as  a  substitute  who  has  been  summoned 
to  serve  on  a  branch  committee  performs  the  duties  of 
an  ordinary  member  of  the  committee,  he  shall  receive 


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The     Swedish     Banking     System 

the  amount  of  salary  assigned  to  that  member  calculated 
according  to  the  time  devoted  to  the  management  and 
supervision  of  the  branch. 

PART  5. 

[§§  58  to  84  relate  to  the  number,  grades,  salaries,  and 
pensions  of  the  staff  of  the  head  and  branch  offices.  As 
in  the  case  of  certain  earlier  sections,  it  has  not  been 
judged  necessary  to  present  them  here.] 


22150—10 14  209 


APPENDIX  III. 

SWEDISH    LAW    RESPECTING     BANKING     COMPANIES    WITH 
UNLIMITED  LIABILITY. 

(SEPTEMBER  18,  1903.) 

CHAPTER  I. — Of  the  formation  of  the  company  and  of  its 

capital. 

§  i.  Those  who,  for  the  purpose  of  conducting  the  busi- 
ness of  banking,  propose  to  establish  a  company  with 
personal  responsibility  for  its  shareholders,  and  seek  to 
secure  for  themselves  the  enjoyment  of  those  rights 
which  are  granted  by  this  law,  are  required  to  make  an 
application  to  that  effect  to  the  Crown,  accompanied  by 
a  copy  of  the  proposed  articles  of  association. 

The  founders  must  be  Swedish  citizens  residing  in  this 
country,  and  at  least  twenty  in  number. 

Should  such  a  company  be  judged  to  be  for  the  benefit 
of  the  country,  the  articles  of  association  shall  be  examined 
on  behalf  of  the  Crown,  in  reference  to  their  agreement 
with  this  law  and  with  the  general  laws  of  the  country, 
and  also  with  the  purpose  of  determining  what  further 
special  regulations  may  be  desirable,  having  regard  to 
the  extent  and  nature  of  the  business  to  be  conducted. 

In  case  the  articles  of  association  are  approved,  the 
permission  to  conduct  a  banking  business  shall  be  notified 
by  the  Crown,  such  permission  (charter)  to  be  for  a  term 
not  exceeding  ten  years  and  till  the  end  of  the  calendar 
year  then  next  ensuing. 


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National    M on  et ar y     Commission 

The  company  shall  be  registered  in  accordance  with 
later  provisions  of  this  law. 

§  2.  When  the  founders  have  received  notification  of 
the  grant  of  the  charter,  they  shall  issue  an  invitation  to 
subscribe  to  shares  in  the  capital. 

This  prospectus,  which  shall  be  signed  by  the  founders, 
and  be  accompanied  by  an  attested  copy  of  the  decision 
of  the  Crown  as  to  the  establishment  of  the  company, 
shall  contain  a  statement  of  the  limit  of  time,  not  exceed- 
ing six  months  from  the  date  of  notification  of  the  grant 
of  the  charter,  within  which  a  meeting  of  the  subscribers 
shall  be  held  to  decide  the  question  of  the  formation  of 
the  company,  and  a  statement  of  the  mode  of  distribu- 
tion of  shares  among  subscribers  which  is  to  be  adopted 
in  case  of  oversubscription. 

Subscriptions  secured  otherwise  than  by  the  issue  of 
such  a  prospectus  as  is  here  specified  shall  be  invalid. 

§  3.  Any  rights  or  advantages  reserved  to  themselves 
by  the  founders  shall  have  no  effect  as  against  the  com- 
pany unless  they  are  completely  specified  in  the  prospectus. 

§  4.  It  is  incumbent  on  the  founders  to  summon  the 
general  meeting  for  the  determination  of  the  question  of 
the  company's  formation  within  the  time  specified  in  the 
prospectus  and  in  accordance  with  the  rules  which  are 
to  apply  for  summoning  ordinary  general  meetings.  In 
case  such  a  meeting  is  not  held  within  the  prescribed 
time  limit,  subscriptions  shall  cease  to  be  binding  on 
applicants  for  shares. 

§  5.  At  the  meeting  referred  to  in  §  4,  in  case  the  sub- 
scription lists  show  that  the  capital,  as  specified  in  the 


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The      Swedish     Banking     System 

prospectus,  is  fully  subscribed,  and  that  the  subscribers, 
inclusive  of  the  founders,  amount  to  at  least  the  number 
specified  in  §  9,  and  after  any  oversubscription  has  been 
adjusted  between  the  subscribers  and  the  excess  declared 
void,  the  question  shall  be  decided  whether  the  company 
shall  be  formed.  The  majority  of  those  present,  however, 
shall  have  the  right  to  defer  the  final  decision  of  the  ques- 
tion to  an  adjourned  meeting  to  be  held  within  a  month 
thereafter. 

If  a  resolution  to  establish  the  company  be  passed 
unanimously,  or  if,  on  a  vote  on  such  a  resolution,  the 
majority  are  in  its  favor  and  comprise  at  least  one-fourth 
part  of  the  entire  number  of  subscribers,  inclusive  of  the 
founders,  and  represent  an  aggregate  subscription  of  at 
least  one-fourth  part  of  the  entire  capital,  the  company 
shall  be  regarded  as  formed.  In  the  contrary  case,  the 
resolution  in  favour  of  its  formation  shall  be  deemed  to 
be  lost. 

Founders  who,  as  referred  to  in  §  3,  have  reserved  to 
themselves  special  rights  or  advantages,  may  not  take 
part  in  the  voting  treated  of  in  this  section,  nor  shall  any 
such  founder,  or  the  shares  which  he  has  subscribed,  be 
taken  into  account  in  the  voting. 

§  6.  In  case  the  founders  amount  to  at  least  the  number 
specified  in  §  9,  and  take  up  the  entire  amount  of  the 
share  capital,  the  company  shall  be  regarded  as  formed 
by  agreement  between  them. 

§  7.  On  the  formation  of  the  company,  the  election  of 
directors  and  auditors  shall  take  place  without  delay. 

§  8.  The  capital  of  a  banking  company  shall  amount  to 
not  less  than  i  ,000,000  kronor.  Nevertheless,  in  case  the 

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National    Monetary     Commission 

detailed  provisions  of  the  articles  of  association  respecting 
the  nature  of  the  business  to  be  undertaken  clearly  show 
that  the  company  does  not  purpose  to  carry  on  the  busi- 
ness of  banking  on  a  large  scale,  but  only  to  facilitate  the 
moderate  exchanges  of  a  defined  locality,  the  capital  may, 
should  the  permission  of  the  Crown  be  secured,  be  fixed 
at  a  sum  smaller  than  i  ,000,000  kroner,  though  in  no  case 
at  less  than  200,000  kronor. 

§  9.  A  banking  company  shall  be  composed  of  at  least 
thirty  ordinary  shareholders,  who  shall  be  Swedish  citi- 
zens. These  shareholders  shall  provide  the  company's 
capital,  and  shall  be  responsible  for  the  fulfillment  of  all 
the  obligations  of  the  company,  each  for  all  and  all  for 
each. 

The  responsibility  for  the  company's  obligations  which 
is,  by  this  section,  imposed  on  each  ordinary  shareholder 
over  and  above  his  share  in  the  subscribed  capital,  may 
not  be  enforced  by  the  creditors  of  the  company  in  a  man- 
ner other  than  that  provided  for  in  the  law  relating  to  the 
bankruptcy  of  banking  companies  and  savings  banks, 
so  far  as  that  law  relates  to  banking  companies  with 
unlimited  liability. 

§  10.  In  the  official  title  of  a  banking  company  the  capi- 
tal of  which  is  not  less  than  1,000,000  kronor,  there  shall 
be  included  the  words  "  enskild  bank."  This  title  may  not 
be  used  by  any  others. 

Should  the  banking  company's  capital  be  less  than 
i  ,000,000  kronor,  its  official  title  shall  include  the  words 
"  people's  bank  "  (folkbank) . 


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The      Swedish     Banking     System 

No  private  individual  or  other  private  financial  institu- 
tion which  is  not  a  company  such  as  is  dealt  with  in  the 
present  law,  or  a  savings  bank,  or  a  banking  company  with 
limited  liability,  may  use  in  its  official  title  (firm  name) 
the  word  "bank." 

The  official  title  of  a  banking  company  shall  be  distinct 
from  that  of  any  existing  company  previously  registered 
in  legal  form,  and  also  from  the  designation  of  any  foreign 
banking  institution  which  is  generally  known  in  this 
country. 

§11.  The  capital  shall  be  divided  into  shares  of  equal 
amount.  The  amount  to  be  paid  by  the  subscriber  of  any 
share  shall  not  be  fixed  at  a  sum  less  than  the  face  value  of 
the  share. 

Bank  shares  shall  be  indivisible  as  against  the  company. 

In  case  it  is  provided  that  the  capital  may,  without  a 
change  in  the  articles  of  association,  be  altered  in  amount, 
the  lowest  amount  at  which  it  may  be  fixed  shall  not  be 
less  than  the  half  of  the  highest  amount  permissible. 

§12.  Share  certificates  shall  be  issued ,  which  shall  specify 
the  numbers  borne  by  the  share  or  shares  to  which  they 
refer.  Such  certificates  shall  be  made  out  in  favor  of  a 
person  named  in  them. 

§  13.  At  least  20  per  cent  of  the  capital  shall  be  paid 
up  before  the  banking  company  commences  business,  a 
further  20  per  cent  at  least  within  three  months,  and  the 
remainder  within  eight  months  from  the  commencement 
of  the  company's  business. 

Share  certificates  shall  not  be  issued  before  the  com- 
pany is  registered  and  the  capital  fully  paid  up. 


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National    Monetary     Commission 

§  14.  Any  subscriber  of  ordinary  shares  who  has  not 
paid  up  his  shares  in  full  on  the  formation  of  the  company 
shall  be  required  to  deposit  adequate  security  for  the  ful- 
fillment of  his  obligation  to  pay  the  balance  due  in  accord- 
ance with  the  provisions  of  §  13. 

§  15.  Any  subscriber  failing  to  make  the  payments  on 
his  shares  within  the  limits  of  time  fixed  for  the  same  shall 
be  required  to  pay  interest  at  the  rate  of  6  per  cent  per 
annum  from  the  due  date. 

Should  payments  not  be  made  at  the  dates  at  which 
they  are  due  before  the  security  mentioned  in  §  14  has  been 
deposited,  or  should  a  subscriber  neglect  to  deposit  such 
security,  the  directors  shall,  in  case  the  matter  is  not  set 
right  within  a  month  after  warning  given,  declare  the 
right  to  shares  in  the  company  annulled.  The  same  pro- 
cedure shall  also  follow  any  subsequent  failure  to  make 
payments  within  the  time  prescribed  if  the  security  de- 
posited prove  insufficient  to  provide  for  the  payment  due. 

Notification  of  the  time  for  the  payment  of  calls,  and 
such  warning  as  is  referred  to  above,  shall  be  regarded 
as  duly  given  when  it  is  made  in  such  manner  as  is  re- 
quired for  the  summons  to  an  ordinary  general  meeting 
or,  in  case  a  shareholder's  address  has  been  notified  to  the 
directors,  if  it  be  sent  to  him  in  a  registered  letter. 

The  annulment  of  the  right  to  shares  in  the  company 
does  not  confer  the  right  to  the  recovery  of  sums  already 
paid  up  on  shares  or  of  what  may  be  realized  on  the 
security  deposited. 

§  1 6.  The  capital  may  not  be  increased  by  a  new  sub- 
scription before  the  payment  of  what  has  been  previously 


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The      Swedish     Banking     System 

subscribed  has  been  made  in  full.  A  decision  in  favor 
of  such  increase  may  not  be  carried  out  before  it  is  regis- 
tered. 

Share  certificates  may  not  be  issued  in  such  a  case 
before  payment  is  completely  made  for  the  share  or 
shares  covered  by  the  certificate. 

The  time  for  the  completion  of  payments  on  new 
shares  may  not  be  so  fixed  as  to  exceed  one  year  from  the 
date  of  the  registration  of  the  resolution  authorizing 
their  issue. 

§  17.  The  provisions  of  §  15  in  regard  to  neglect  of  pay- 
ment of  calls  on  shares  subscribed,  and  warning  to  com- 
plete such  payments,  shall  apply  correspondingly  to  the 
case  of  new  subscriptions. 

§  1 8.  The  ordinary  shareholders  shall  have  the  option 
of  associating  with  themselves  shareholders  en  com- 
mandite.  Such  shareholders  shall  not  be  responsible  for 
the  obligations  of  the  company  to  an  amount  exceeding 
what  they  have  paid  in  to  the  company  or  undertaken 
to  pay  in.  Shareholders  en  commandite  may  not  be 
included  in  a  company  for  amounts  exceeding  the  half 
of  the  ordinary  capital.  The  fund  subscribed  by  share- 
holders en  commandite  shall  be  available  equally  with  the 
ordinary  capital  for  meeting  all  the  obligations  of  the 
company,  but,  on  the  liquidation  of  the  affairs  of  the 
company,  the  shareholders  en  commandite  shall  have  the 
right  to  the  repayment  of  their  subscriptions  before  any 
distribution  to  the  ordinary  shareholders  may  take  place. 
A  share  en  commandite  shall  have  the  same  face  value  as 
an  ordinary  share,  and  shall  be  issued  in  favor  of  a  defi- 
nitely named  person. 

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National    M  o  n  et  ar  y     Commission 

Shareholders  en  commandite  may  take  no  part  in  voting 
at  general  meetings  on  matters  other  than  the  election 
of  auditors,  and  they  shall  be  eligible  for  election  as 
auditors. 

§  19.  Every  ordinary  shareholder  shall  furnish  to  the 
company  a  declaration,  signed  by  himself  and  witnessed 
by  two  persons,  setting  forth  the  shares  he  owns  in  the 
company.  Before  such  a  declaration  is  supplied,  he  may 
not  receive  any  share  of  profits  from  the  company  or  exer- 
cise any  other  of  the  rights  of  a  shareholder. 

§  20.  An  ordinary  shareholder  shall  not  be  entitled  to 
withdraw  from  the  company  during  the  term  of  its  char- 
ter, unless  the  company  assent  thereto. 

The  same  holds  of  the  estate  of  a  deceased  shareholder. 
When,  however,  the  shares  belonging  to  such  an  estate 
become,  through  inheritance  or  marriage,  the  property 
of  a  successor  in  title  who  is  qualified  under  §  9  to  be  an 
ordinary  shareholder,  and  he  has  made  such  a  declaration 
as  is  specified  in  §  19,  the  other  heirs  to  the  estate  are  dis- 
charged from  the  company. 

Shareholders  en  commandite  may  transfer  their  shares 
to  others,  after  notice  to  the  directors  of  the  company, 
and  by  the  observance  of  those  forms  which  the  company 
may  prescribe  for  such  transfers. 

§  21.  Should  an  ordinary  share  have  been  transferred, 
otherwise  than  by  inheritance  or  marriage,  to  a  new 
owner,  the  latter  may  not  exercise  any  of  the  rights  of  a 
shareholder  before  the  company  has  approved  the  trans- 
fer, except  that  he  may,  if  §  9  places  no  obstacle  in  the 
way  of  his  acceptance  as  an  ordinary  shareholder,  after 


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The      Swedish     Banking     System 

making  such  a  declaration  as  is  specified  in  §  19,  draw  such 
share  of  profits  as  falls  to  the  shares  he  owns  and  similarly 
the  share  arising  out  of  the  liquidation  of  the  company. 

In  the  interval  between  an  ordinary  general  meeting 
and  the  next  following  ordinary  general  meeting  of  the 
company,  the  rights  of  the  company  in  the  matter  of  the 
transfer  of  shares  are  assigned  to  the  board  of  directors, 
except  in  the  case  treated  in  the  third  paragraph  of  this 
section.  A  summons  to  a  meeting  at  which  such  questions 
of  share  transfer  are  to  be  dealt  with  shall  contain  a  state- 
ment that  questions  of  that  character  will  be  brought 
forward.  Should  the  transfer  fail  to  be  approved  unani- 
mously by  the  members  of  the  board  present,  the  question 
shall  be  referred  for  decision  to  the  ordinary  general 
meeting.  Transfers  approved  by  the  directors  shall  be 
notified  at  the  next  following  ordinary  general  meeting. 

Should  an  ordinary  shareholder  desire  to  transfer  the 
last  of  the  shares  he  holds,  or  should  a  director  desire  to 
transfer  any  of  the  shares  he  held  when  he  was  last  elected 
as  a  director,  such  transfer  shall  require  the  approval  of 
an  ordinary  general  meeting. 

§  22.  The  board  of  directors  shall  provide  for  the  keep- 
ing of  a  special  book  at  the  head  office  of  the  company,  in 
which  all  shareholders,  whether  ordinary  shareholders  or 
shareholders  en  commandite,  shall  be  registered  and  a 
record  kept  of  the  shares  each  holds. 

On  the  transfer  of  a  share  to  a  new  owner  and  the 
approval  of  his  entry  into  the  company,  a  record  of  the 
fact  shall  be  entered  in  the  register. 

It  shall  be  incumbent  on  the  board  of  directors  to  per- 
mit any  who  desire  it  to  consult  the  register  of  share- 

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National    M  o  n  et  ar  y     Commission 

holders  during  the  hours  at  which  the  bank  is  open  to  the 
public,  and,  on  payment  therefor,  to  obtain  an  extract 
from  the  register  duly  attested  by  the  proper  official. 

§  23.  So  long  as  a  banking  company  endures,  the 
paid-up  ordinary  capital,  and  the  special  fund  provided 
by  shareholders  en  commandite,  may  not  be  diminished  by 
division  or  other  repayment  to  ordinary  shareholders. 

§  24.  Of  the  yearly  profits  of  the  bank,  at  least  15 
per  cent  shall  be  assigned  for  the  formation  of  a  reserve 
fund.  When  the  reserve  fund  amounts  to  50  per  cent  of 
the  company's  ordinary  capital,  further  assignments  to  it 
may  cease;  should  the  reserve  fund  be  reduced  below  the 
amount  named,  assignments  to  it  shall  be  resumed. 

There  shall  always  be  assigned  to  the  reserve  fund  such 
amounts  as  may  be  secured  on  the  subscription  of  shares 
over  and  above  the  face  value  of  the  shares,  and  also,  in 
case  the  right  to  shares  have  been  annulled,  whatever  may 
have  been  paid  up  on  such  shares  or  may  be  realized  on 
the  security  deposited  in  respect  of  them. 

The  reserve  fund  shall  only  be  applied  to  meeting  losses 
which  have  occurred  in  the  conduct  of  the  bank's  business 
as  a  whole  and  which  can  not  be  met  out  of  other  funds 
assigned  for  future  disposal. 

§  25.  In  case  a  division  of  profits  has  been  resolved  on 
and  carried  out  while  a  banking  company  continues  in 
business,  but,  in  accordance  with  the  latest  duly  audited 
accounts,  the  funds  for  the  same  can  not  be  provided 
without  the  transgression  of  the  provisions  of  §§  23  and 
24  in  regard  to  the  funds  of  the  company,  those  share- 
holders who  have  received  any  part  of  such  profits 


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The      Swedish     Banking     System 

shall  be  required  to  refund  the  amounts  received,  and 
those  who  took  part  in  the  decision  to  make  the  division 
shall  be  responsible,  each  for  all  and  all  for  each,  for  any 
losses  which  may  arise  in  connection  with  such  repayment. 

§  26.  Before  a  banking  company  is  registered,  it  can  not 
secure  rights  or  incur  obligations,  nor  can  it  appear  in  any 
capacity  before  a  court  of  law  or  other  authority. 

Should  any  obligations  be  incurred  on  behalf  of  the 
company  before  its  registration,  those  who  incurred  such 
obligations  shall  be  responsible  for  the  same  as  for  their 
own  debts,  each  for  all  and  all  for  each. 

CHAPTER  II. — Of  the  business  to  be  transacted. 

§  27.  A  banking  company  may  not  trade  in  other 
things  than  gold,  inland  and  foreign  bills  of  exchange,  and 
interest-bearing  paper. 

Real  or  personal  property,  pledged  or  mortgaged  in 
favour  of  the  company,  which  may  be  sold  by  auction, 
may  be  bought  in  by  the  company  in  order  to  protect  its 
claims,  but  shall  be  disposed  of  again  as  soon  as  this  can 
be  effected  without  loss. 

A  banking  company  may  acquire  real  estate  needed  for 
its  office  accommodation. 

A  banking  company  may  not  accept  as  security  either 
its  own  share  certificates  or  the  certificates  representing 
ordinary  shares  in  any  other  banking  company. 

§  28.  A  banking  company  may  not  issue,  on  printed  or 
engraved  forms,  its  promises  to  pay,  whether  to  a  specified 
person,  to  order,  or  to  bearer. 

§  29.  On  the  deposit  of  money  with  a  bank  to  remain 
for  a  defined  period  of  time,  with  or  without  interest,  the 


National    Monetary     Commission 

receipt  issued  by  the  bank  in  respect  of  such  deposit  shall 
be  in  favour  of  a  person  named  therein,  and  shall  contain 
the  statement  that  the  receipt  may  be  transferred  only 
to  a  person  specified  by  name,  the  transfer  being  required 
to  be  notified  to  the  bank  for  the  security  of  the  new 
owner. 

On  funds  deposited  on  accounts  designated  as  savings- 
bank  accounts,  or  on  accounts  of  a  similar  character, 
interest  may  not  be  paid  on  a  greater  sum  than  3,000 
kronor  standing  to  the  credit  of  any  one  depositor. 
Further,  the  bank  shall  not  enter  into  any  obligation  to 
repay  such  deposits  otherwise  than  after  a  specified  term 
of  notice,  which  term  shall  not  be  less  than  one  week; 
should  it  appear  to  the  directors  that  such  a  course  in- 
volves no  inconvenience,  they  may,  in  special  cases,  grant 
repayment  without  waiting  for  the  termination  of  the 
period  of  notice. 

CHAPTER  III. — Of  the  administration  and  management,  and 
of  general  meetings  and  audits. 

§  30.  The  ordinary  shareholders  shall  elect  from  among 
themselves  a  board  of  directors  consisting  of  at  least 
five  members,  to  represent  the  company.  These  direct- 
ors shall  be  resident  in  Sweden.  The  term  for  which  a 
director  is  elected  may  not  exceed  five  years.  A  director 
may  resign  his  office,  even  though  the  term  for  which  he 
was  elected  has  not  expired,  if  his  resignation  be  accepted 
by  a  vote  of  a  general  meeting  of  the  shareholders. 

Any  limitation  of  the  rights  of  the  directors  to  represent 
the  company  shall  have  no  force  as  against  anyone  who  is 


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not  proved  to  have  had  knowledge  of  such  limitation. 
A  resolution  containing  any  such  limitation  may  not  be 
registered. 

§  31.  The  company  may  empower,  or  may  authorize 
the  directors  to  empower,  a  person  to  affix  the  signature  of 
the  company,  even  though  he  be  not  a  member  of  the 
board  of  directors. 

As  to  the  limitation  of  such  power  to  sign  for  the  com- 
pany, the  law  shall  be  as  is  stated  in  the  second  paragraph 
of  §  30. 

§  32.  Written  contracts,  made  on  behalf  of  the  com- 
pany, shall  be  signed  on  its  behalf  with  its  official  title. 
In  signing  on  behalf  of  the  company,  those  who  are  em- 
powered to  affix  its  signature  shall  also  sign  their  own 
names. 

In  case  any  contract,  made  on  behalf  of  the  company,  is 
not  duly  and  properly  signed  on  its  behalf,  for  the  conse- 
quences of  such  defect  or  omission  those  who  signed  the 
contract  shall  be  responsible,  each  for  all  and  all  for  each, 
as  for  their  personal  obligations. 

§  33.  The  directors  may  appoint  an  official  who  shall, 
on  behalf  of  the  company,  enter  and  defend  actions  at 
law,  conduct  cases  in  which  it  is  involved,  and  act  as  its 
advocate  on  the  trial  of  such  actions. 

Such  authority  as  is  specified  in  §  31  may,  however,  not 
be  conferred  except  on  the  direction  of  the  company. 

§  34.  At  meetings  of  the  board  of  directors,  that  shall 
be  the  valid  decision  of  the  board  in  favour  of  which  a 
majority  of  those  voting  are  found  in  agreement,  so  far 
as  it  is  not  otherwise  provided  in  the  articles  of  association, 


223 


National    M  o  n  et  ar  y     Commission 

but  in  case  of  equality  of  votes,  the  chairman's  casting 
vote  shall  decide. 

A  director  may  not  take  part  in  the  decision  of  any 
question  in  which  his  private  rights  are  in  conflict  with 
those  of  the  company. 

§  35.  It  shall  be  the  duty  of  the  directors,  in  the  per- 
formance of  their  functions,  to  observe  those  special 
instructions  which  may  have  been  given  by  the  company 
and  are  not  in  conflict  with  the  laws  or  constitution  of 
the  country  or  with  the  articles  of  association. 

§  36.  The  rights  of  the  shareholders  to  take  part  in  the 
affairs  of  the  company  shall  be  exercised  through  general 
meetings. 

It  is  forbidden  to  any  to  take  part,  whether  on  his  own 
behalf  or  acting  on  behalf  of  others,  in  the  decision  of  any 
question  in  which  his  private  rights  are  in  conflict  with 
those  of  the  company;  and  in  particular  a  director  may 
not  take  part  in  the  decision  of  a  general  meeting  regard- 
ing freedom  from  liability  for  acts  of  management  for 
which  he  is  responsible,  nor  may  he  take  part  in  the  elec- 
tion of  any  auditor. 

There  shall  be  provision  made  by  the  directors  for  the 
preparation  of  a  report  of  the  proceedings  of  general  meet- 
ings, showing  who  of  the  shareholders  have  taken  part  in 
the  business  of  the  meeting,  and  the  number  of  shares 
for  which  each  of  them  has  the  right  to  vote.  Not  later 
than  fourteen  days  after  the  meeting  this  report  shall  be 
accessible  to  the  shareholders. 

§  37.  A  decision  to  alter  the  articles  of  association  or 
to  wind  up  the  company  for  any  reason  other  than  is 


224 


The     Swedish     Banking     System 

specified  in  §§  49,  50,  52,  or  59  shall  not  be  valid  unless 
all  the  ordinary  shareholders  have  agreed  thereto,  or 
unless  it  be  carried  at  two  consecutive  general  meetings, 
of  which  at  least  one  shall  be  an  ordinary  general  meeting, 
and  be  supported  by  at  least  two-thirds  of  those  voting  at 
the  later  of  such  two  general  meetings. 

If  the  articles  of  association  impose  any  further  con- 
ditions on  the  validity  of  such  decisions  as  are  now  in 
question,  these  shall  also  be  fulfilled. 

Alterations  in  the  articles  of  association  shall  not  be 
valid  unless  they  receive  the  approval  of  the  Crown. 

§  38.  In  regard  to  votes  and  decisions  at  general  meet- 
ings referred  to  in  §§  36  and  37,  in  case  other  provisions 
are  not  contained  in  the  articles  of  association,  the  fol- 
lowing shall  apply:  Every  share  confers  the  right  to  one 
vote;  the  vote  of  absent  shareholders  may  be  given  by 
proxy;  that  shall  be  held  to  be  the  decision  of  the  com- 
pany for  which  the  greatest  number  of  votes  is  given; 
and  in  elections,  in  case  of  equality  of  votes,  lots  shall  be 
drawn  to  determine  the  result,  but  in  other  questions  that 
view  shall  prevail  which  is  supported  by  the  majority  of 
votes  cast,  or,  in  case  of  equality  of  votes,  by  the  chair- 
man of  the  meeting. 

§  39.  The  ordinary  general  meeting  shall  be  held  within 
four  months  after  the  close  of  each  calendar  year.  At 
the  meeting  the  board  of  directors  shall  present  its  report 
and  the  accounts  for  the  year  last  closed,  together  with 
the  report  which,  in  accordance  with  §  46,  is  required  of 
the  auditors. 

At  least  eight  days  before  an  ordinary  general 
meeting  the  directors  shall  ensure  that  a  statement  of 

22150—10 15  225 


National    Monetary     Commission 

the  business  to  be  brought  before  the  meeting  shall  be 
available  at  the  bank's  head  office  to  the  shareholders. 
Business  which  is  not  specified  in  this  statement  may 
not  be  decided  at  the  meeting  unless  with  the  concur- 
rence of  all  present,  unless  it  arises  directly  out  of  the 
annual  report,  the  accounts,  or  the  auditors'  report,  or 
it  is  provided  in  the  articles  of  association  that  it  shall 
be  decided  at  the  meeting. 

A  shareholder  desiring  to  bring  any  business  before  the 
meeting  shall  send  written  notice  thereof  to  the  direct- 
ors at  least  fourteen  days  previous  to  the  meeting. 

§  40.  The  annual  report  required  in  §  39  to  be  made  by 
the  directors  and  submitted  to  the  general  meeting  shall 
expressly  state  the  amount  of  the  profit  or  loss  which  has 
resulted  from  the  business  of  the  year. 

The  accounts  referred  to  in  the  same  section  shall 
exhibit,  respectively,  the  income  and  expenditure  of  the 
year  covered  by  the  accounts,  and  the  assets  and  liabili- 
ties at  the  close  of  the  year.  The  assets  may  not  be 
entered  at  amounts  in  excess  of  their  actual  value.  In 
particular,  doubtful  claims  shall  be  entered  only  at  such 
amounts  as  are  estimated  to  be  realized  on  them,  and  bad 
debts  shall  be  written  off. 

The  report  and  accounts  shall  be  placed  in  the  hands  of 
the  auditors  at  least  one  month  before  the  meeting,  and 
the  report  and  accounts,  together  with  the  auditors' 
report,  shall  be  made  accessible  in  adequate  numbers  of 
copies  to  all  ordinary  shareholders  at  the  head  office  of 
the  company. 

§  41.  At  the  meeting  at  which  the  annual  report  of  the 
directors,  and  the  accounts,  together  with  the  auditors' 

226 


The     Swedish     Banking     System 

report,  are  presented,  there  shall  be  considered  the  ques- 
tion of  granting  to  the  directors  freedom  from  liability 
in  respect  of  the  period  covered  by  the  report.  If  a 
motion  to  defer  the  decision  of  the  question  be  sup- 
ported by  holders  of  shares  amounting  to  at  least  one- 
tenth  part  of  the  entire  ordinary  capital,  such  deferment 
to  an  adjourned  meeting  to  be  held  within  two  months 
may  not  be  refused. 

If  the  discussion  of  the  administration  of  the  company 
during  the  period  covered  by  the  report  be  not  concluded 
within  a  year  from  the  date  of  the  presentation  of  the 
report,  the  effect  shall  be  the  same  as  if  freedom  from 
liability  had  been  granted  to  the  directors. 

Without  regard  to  the  grant  of  freedom  from  liability 
the  company  shall  be  entitled,  within  two  years  from  the 
date  of  the  presentation  of  a  report  to  a  general  meeting, 
to  institute  proceedings  against  any  director  who  may  be 
shown  to  have  knowingly  made  false  statements  in  the 
report,  in  case  these  can  be  regarded  as  bearing  on  the  vote 
of  freedom  from  liability. 

§  42.  The  directors  may,  when  they  find  it  desirable  to 
do  so,  summon  a  special  general  meeting. 

Such  a  meeting  shall  be  summoned  when  shareholders 
representing  at  least  one-tenth  part  of  the  entire  ordinary 
capital,  or  such  less  part  as  may  be  specified  in  the  articles 
of  association,  make  a  written  demand  to  that  effect,  speci- 
fying the  purpose  of  the  meeting. 

At  a  special  general  meeting  no  business  shall  be  decided 
which  was  not  specified  in  the  notice  summoning  the 
meeting. 


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National    M on  et ar y     Commission 

§  43.  In  case  the  directors  have  neglected,  within  four- 
teen days  after  the  presentation  of  a  demand  such  as  is 
specified  in  §  42,  to  summon  a  general  meeting  to  be  held 
within  one  month,  unless  otherwise  provided  in  the  articles 
of  association,  or  in  case  the  directors  neglect  to  summon 
the  ordinary  general  meeting  in  the  regular  course,  the 
local  representative  of  the  Crown  shall,  on  demand  made 
by  a  shareholder,  at  once  issue  notices  summoning  a 
general  meeting. 

§  44.  If,  in  the  opinion  of  the  board  of  directors  or  of 
any  director  or  shareholder,  a  decision  arrived  at  by  a 
general  meeting  has  not  been  made  in  proper  order,  or  is 
in  conflict  with  the  laws  of  the  country,  or  the  constitution, 
or  with  the  articles  of  association,  they  or  he  shall  be 
entitled  to  take  proceedings  against  the  company  within 
two  months  of  the  date  of  such  a  decision.  If  this  be  not 
done  within  that  period  the  right  to  take  action  is  lost. 

What  is  here  provided  in  respect  of  the  challenge  of  a 
decision  of  a  general  meeting  shall  also  apply  in  case  a  sub- 
scriber of  shares  desires  to  challenge  the  votes  of  a  meeting 
such  as  is  treated  of  in  §  4. 

§  45.  Regarding  the  right  of  a  director  to  accept  service 
in  such  proceedings  on  behalf  of  the  company  the  rules  of 
civil  procedure  shall  apply.  What  applies  in  such  a  case 
shall  also  apply  equally  in  the  case  of  agents  of  other 
public  authorities  in  their  relations  with  the  company. 

Should  the  directors  desire  to  challenge  a  decision  arrived 
at  by  a  general  meeting,  or  otherwise  proceed  against  the 
company,  the  shareholders  shall  be  called  together  to  ap- 
point a  representative  to  appear  on  behalf  of  the  company 


228 


The     Swedish     Banking     System 

in  the  matter  at  issue.  The  writ  shall  be  regarded  as  duly 
served  when  it  is  laid  before  the  meeting;  but  in  such  cases 
as  are  dealt  with  in  §  44  the  right  of  the  directors  to  pro- 
ceed is  preserved  if  within  the  time  there  specified  the 
notices  have  been  issued  calling  a  meeting  without  delay. 

§  46.  The  shareholders  shall  elect  auditors  yearly  for 
the  consideration  of  the  administration  of  the  company 
by  the  directors  and  of  the  accounts  of  the  company.  At 
least  each  second  year  one  of  these  auditors  shall  be 
changed. 

An  auditor  elected  by  the  shareholders  may  resign  his 
office,  although  the  term  for  which  he  was  elected  has  not 
expired,  if  his  resignation  be  accepted  by  a  general 
meeting. 

§  47.  Auditors  shall  have  the  right  to  have  access  to  all 
the  company's  books,  accounts,  and  other  records;  and 
the  directors  may  not  withhold  any  information  regarding 
the  management  of  the  company  which  is  demanded  by 
an  auditor. 

Should  the  examination  of  the  affairs  of  the  company 
afford  occasion  therefor,  the  auditors  may  demand  in 
writing,  with  a  statement  of  the  reasons,  that  a  special 
general  meeting  shall  be  summoned  by  the  directors.  In 
case  such  a  demand  be  made,  the  provisions  of  §  43  shall 
apply. 

§  48.  Should  the  auditors  in  their  report  have  knowingly 
made  a  false  statement,  or  deliberately  avoided  calling 
attention  to  any  such  statement  in  the  report  or  accounts, 
or  in  the  performance  of  their  duties  have  shown  grave  lack 
of  care,  those  who  are  at  fault  shall  be  liable  to  the  com- 


229 


National    Monetary     Commission 

pany  for  the  resulting  loss,  each  for  all  and  all  for  each. 
Actions  in  such  cases  may  not  be  brought  after  the  lapse 
of  two  years  from  the  date  of  laying  the  auditors'  report 
before  the  general  meeting. 

CHAPTER  IV. — Of  the  winding  up  of  a  banking  company , 
and  of  the  renewal  of  its  charter. 

§  49.  Should  a  banking  company  be  shown,  by  its  duly 
audited  accounts,  to  have  incurred  such  losses  that  the  re- 
serve fund  and  10  per  cent  of  the  ordinary  capital  is 
lost,  the  directors  shall,  not  later  than  the  day  on  which 
the  auditors'  report  is  presented,  summon  a  general  meet- 
ing to  be  held  on  the  earliest  day  permitted  by  the  articles 
of  association;  and  the  directors  shall  send  a  notification 
of  such  meeting  without  delay  by  registered-letter  post  to 
every  ordinary  shareholder  whose  address  is  known. 
The  summons  to  the  meeting  shall  contain  a  statement 
that  such  losses  as  are  here  specified  have  been  incurred. 

Should  the  ordinary  shareholders  subscribe,  either  be- 
fore or  at  s'uch  a  general  meeting,  such  a  sum  as  may  re- 
store the  capital  to  its  prescribed  amount,  the  company 
shall  be  entitled  to  continue  its  operations;  should  this 
subscription  not  be  secured,  or  should  the  amounts  sub- 
scribed to  replace  the  lost  capital  not  be  paid  in  within 
three  months  from  the  date  of  the  meeting,  the  company 
shall  be  dissolved,  and  proceedings  in  liquidation  shall  be 
taken. 

Those  shareholders  who  have  thus  subscribed  shall  be 
entitled  to  be  repaid  the  amount  of  their  contributions, 
with  interest  at  6  per  cent  per  annum,  out  of  the  realized 


230 


The     Swedish     Banking     System 

profits  of  the  company  before  any  further  dividend  is 
paid  on  the  ordinary  shares.  Should  the  company  be 
wound  up  before  the  repayment  of  such  contributions 
has  been  made  in  full,  thereafter  the  payment  of  the 
debts  of  the  company,  and  of  the  sums  contributed  by 
shareholders  en  commandite,  if  such  be  included  in  the 
company,  the  balance  of  the  amount  contributed  as  above, 
but  without  interest  for  the  time  subsequent  to  the  cessa- 
tion of  business,  shall  be  paid  out  of  the  assets  of  the  com- 
pany, so  far  as  they  may  suffice  to  cover  it,  before  any 
other  division  of  assets  among  the  ordinary  shareholders 
is  made. 

Should  it  appear  in  the  course  of  any  financial  year  that 
there  is  reason  for  believing  that  such  losses  as  are  dealt 
with  in  this  section  have  been  incurred,  it  shall  be  the  duty 
of  the  directors  to  cause  the  accounts  to  be  made  up  with- 
out delay  and  a  balance  sheet  prepared,  and  to  summon 
the  auditors  to  take  the  same  under  examination. 

§  50.  A  banking  company  shall  also  be  dissolved  and 
proceedings  in  liquidation  be  taken — 

In  case  the  company  has  not  commenced  business 
within  a  year  from  its  formation;  in  case  the  ordinary 
capital  has  not  been  fully  paid  up  within  a  year  from  the 
date  of  the  commencement  of  business  by  the  company; 
in  case  the  number  of  ordinary  shareholders  has  been 
reduced  below  the  number  specified  in  §  9  and  an  adequate 
number  of  new  shareholders  has  not  been  admitted  within 
three  months;  or  in  case  the  period  for  which  the  charter 
was  granted  expires  without  the  grant  of  a  new  charter. 

§  51.  Should  a  banking  company  not  be  dissolved 
although  the  conditions  have  arisen  which  in  accordance 


231 


National    Monetary     Commit  sio 


n 


with  §§49  and  50  require  dissolution,  those  who,  with 
knowledge  of  those  conditions,  take  part  in  a  decision  to 
continue  the  operations  of  the  company,  or  act  on  its 
behalf,  shall  be  liable  for  the  obligations  which  may  be 
incurred,  each  for  all  and  all  for  each,  as  for  their  own 
obligations. 

§  52.  Should  the  King  declare  that  a  banking  com- 
pany has  forfeited  its  charter,  the  company  shall  be 
regarded  as  dissolved  from  the  day  when  such  a  declara- 
tion is  made. 

§  53.  In  case  a  banking  company  is  dissolved  for  rea- 
sons other  than  those  specified  in  §  59,  its  liquidation  shall 
be  conducted  by  the  directors  acting  as  liquidators,  unless, 
as  a  consequence  of  provisions  of  the  articles  of  associa- 
tion, or  of  a  resolution  of  the  company,  one  or  more 
special  liquidators  are  appointed.  The  liquidators  shall 
hold  office  as  such  until  the  liquidation  is  completed,  but 
may  be  removed  from  their  office  at  any  time  by  the 
company  itself. 

§  54.  It  shall  be  the  duty  of  the  liquidators  to  sum- 
mon without  delay  a  meeting  of  the  company's  unknown 
creditors,  to  schedule  its  assets  and  liabilities,  and  to 
draw  up  a  balance  sheet. 

As  soon  as  it  may  be  effected  without  obvious  injury, 
the  property  of  the  company  shall  be  realized  in  cash. 

§  55.  The  powers  of  the  liquidators  to  represent  the 
company  and  their  obligations  shall  be  determined  in 
the  same  manner  as  applies  to  the  directors. 

§  56.  The  official  title  of  a  company  in  liquidation  shall 
be  used  with  the  addition  of  the  words  "in  liquidation." 


232 


The     Swedish     Banking     System 

In  general  the  provisions  of  §  32  in  regard  to  the  sign- 
ing of  contracts  which  are  entered  into  during  the  regular 
existence  of  the  company,  and  in  regard  to  the  conse- 
quences of  neglect  in  respect  to  these  formalities,  shall 
apply  in  like  manner  during  a  company's  liquidation. 

§  57.  Until  the  period  fixed  for  the  presentation  of 
claims  has  terminated,  and  all  known  debts  have  been 
paid  or  the  funds  necessary  for  their  payment  have  been 
reserved  for  that  purpose,  the  assets  of  the  company  may 
not  be  divided  among  its  shareholders.  Should  any  such 
division  be  made,  in  the  event  of  the  company's  incapacity 
to  fulfill  its  obligations,  repayment  by  shareholders  of 
what  they  have  thus  received  shall  be  required. 

§  58.  If  a  shareholder  is  not  satisfied  with  the  conduct 
of  the  winding  up,  or  the  arrangements  made  in  the  course 
of  the  liquidation,  he  shall  commence  an  action  before  the 
appointed  court  within  a  year  from  the  date  of  the  com- 
pletion of  the  liquidation.  If  this  be  not  done,  the  right 
of  action  is  lost. 

§  59.  In  case  of  bankruptcy,  the  company  shall  be 
deemed  to  be  dissolved  on  the  day  on  which  its  petition 
in  bankruptcy  is  filed,  or  if  its  creditors  present  a  petition 
from  the  date  of  issue  of  public  notice  thereof.  Infor- 
mation of  proceedings  in  bankruptcy  shall,  concurrently 
with  their  publication,  be  sent  for  registration  at  the 
direction  of  the  court  or  judge  concerned. 

§  60.  In  the  course  of  bankruptcy  proceedings,  the  com- 
pany shall  be  represented  by  its  directors,  or,  in  case  it 
have  been  dissolved  before  the  commencement  of  pro- 
ceedings in  bankruptcy,  by  its  liquidators.  New  directors 


233 


National    M on  et ar y     Commission 

or  new  liquidators  may,  however,  be  appointed  in  the 
regular  course  during  the  continuance  of  the  bankruptcy 
proceedings. 

§  61.  Should  a  banking  company  be  made  bankrupt 
within  two  years  of  the  presentation  of  any  annual  re- 
port to  a  general  meeting  of  the  company,  the  bankrupt 
estate  shall  have  the  right  to  proceed  against  the  manage- 
ment in  respect  of  the  financial  year  covered  by  that  re- 
port. 

Should  bankruptcy  occur  within  two  years  from  the 
presentation  of  any  auditor's  report  to  the  company,  it 
shall  be  open  to  the  bankrupt  estate  to  take  such  pro- 
ceedings against  the  auditors  as  are  specified  in  §  48. 

The  proceedings  treated  of  in  this  section  shall  be  com- 
menced within  a  month  from  the  declaration  of  bank- 
ruptcy, or  such  further  period  as  may  be  fixed  by  the  com- 
pany in  accordance  with  the  foregoing  provisions.  In 
case  they  be  not  so  commenced,  the  right  to  take  them  is 
lost. 

§  62.  A  banking  company  desiring  the  renewal  of  its 
charter  is  required  in  accordance  with  §  i  to  make  appli- 
cation for  renewal  not  less  than  sixteen  months  before 
the  expiration  of  the  term  of  the  then  current  charter. 

A  resolution  in  favor  of  such  application  must  be 
adopted  at  an  ordinary  general  meeting  held  at  least 
twenty  months  before  the  expiration  of  the  current  charter. 

§  63.  Ordinary  shareholders  who  may  not  desire  to 
continue  as  such  under  a  renewal  of  the  charter  shall  be 
entitled,  on  giving  notice  to  the  directors  before  the  gen- 
eral meeting  referred  to  in  §  62,  to  withdraw  from  the 


234 


The     Swedish     Banking     System 

company  on  the  expiration  of  the  term  of  the  then  current 
charter,  and  to  receive  that  share  of  the  company's  net 
assets  which  falls  to  them  as  shown  by  the  duly  audited 

accounts. 

• 

CHAPTER  V. — Of  registration. 

§  64.  That  registry,  at  which  those  particulars  shall  be 
recorded  which  are  required  by  this  law  to  be  supplied  for 
the  purpose  of  registration,  or  the  inscription  of  which  in 
the  register  is  or  shall  be  otherwise  required,  shall  be  de- 
termined by  the  Crown. 

§  65.  Application  for  the  registration  of  a  banking  com- 
pany shall  be  made  by  the  directors,  and  shall  contain  a 
statement  both  of  the  full  names  and  addresses  of  the  mem- 
bers of  the  board  of  directors,  and  also  of  those  who  are 
authorized  to  affix  the  company's  signature,  and  shall  be 
accompanied  by— 

1.  The  royal  approval  of  the  articles  of  association  in 
two  attested  copies. 

2.  A  record  showing  that  a  board  of  directors  has  been 
elected. 

3.  A  statement  of  the  board  of  directors,  duly  signed  by 
them,  of  the  amount  of  the  subscriptions  to  ordinary  shares 
with  a  deduction  for  oversubscription  should  that  have 
occurred,  and  of  the  amount  actually  paid  up  both  of  the 
ordinary  capital,  and  also,  in  case  shareholders  en  comman- 
dite  have  been  admitted  into  the  company,  of  the  amount 
paid  up  by  them  on  the  fund  which  they  have  subscribed. 

4.  A  list  of  the  ordinary  shareholders,  with  a  statement 
of  the  number  of  shares  held  by  each  of  them. 


235 


National    Monetary     Commission 

There  shall  also  be  attached  to  the  application — 

In  case  subscriptions  have  been  invited  to  the  capital 
fund,  all  the  subscription  lists  in  the  original  and  an  at- 
tested copy  of  each,  with  a  record  showing  that  the  reso- 
lution in  virtue  of  which  the  company  has  been  formed 
has  been  passed  with  the  required  formalities,  or 

In  case  the  founders  have  taken  up  the  whole  of  the 
shares,  the  agreement  made  in  this  respect  either  in  the 
original  or  in  an  attested  copy. 

§  66.  Not  later  than  four  months  after  the  termination 
of  the  period  fixed,  in  accordance  with  §  13,  for  the  final 
payments  on  the  ordinary  shares,  if  a  notification  to  the 
effect  that  the  capital  has  been  paid  up  in  full  have  not 
previously  been  made,  the  board  of  directors  shall  furnish 
for  registration  a  declaration  signed  by  the  members  of  the 
board  of  the  extent  to  which  the  capital  has  been  fully 
paid  up. 

§  67.  Any  resolution  authorizing  an  increase  of  capital 
by  a  new  subscription  shall,whether  it  involve  any  alteration 
of  the  articles  of  association  or  not,  be  reported  for  regis- 
tration by  the  directors.  Its  registration  may  not  be 
granted  unless  the  registry  have  been  notified  that  the 
capital  previously  issued  has  been  fully  paid  up. 

Not  later  than  one  month  after  the  time  fixed  for  the 
final  payments  on  the  new  shares,  the  board  of  directors 
shall  furnish  for  registration  both  a  statement  of  the 
amount  paid  up  on  the  new  shares,  which  statement  shall 
be  signed  by  the  members  of  the  board,  and  a  list  of  the 
proprietors  of  the  new  shares. 

§  68.  When  any  record  of  a  change  in  the  ownership  of 
any  ordinary  share  has  been  entered  in  the  book  referred 

236 


The     Swedish     Banking     System 

to  in  §22,  a  statement  of  that  fact  shall  be  furnished 
without  delay  by  the  directors  for  registration. 

§  69.  In  case  shareholders  en  commandite  have  been  ad- 
mitted to  the  company  before  the  filing  of  the  application 
dealt  with  in  §  65,  immediately  after  the  conclusion  of  the 
period  fixed  for  the  completion  of  payments  on  the  shares 
en  commandite,  unless  a  notification  that  they  have  been 
fully  paid  up  be  previously  furnished,  a  statement  shall  be 
furnished  by  the  board  of  directors,  which  shall  be  signed 
by  the  members  of  the  board,  of  the  amount  paid  up  on 
these  shares. 

§  70.  If,  after  the  filing  of  the  application  dealt  with  in 
§  65,  a  resolution  be  passed  for  the  admission  of  share- 
holders en  commandite,  this  resolution,  even  if  it  do  not 
involve  any  alteration  of  the  articles  of  association,  shall 
be  reported  for  registration  by  the  directors  without 
delay. 

Not  later  than  one  month  after  the  termination  of  the 
period  fixed  for  the  completion  of  payments  on  the  new 
shares  a  statement  shall  be  furnished  by  the  board  of 
directors,  which  shall  be  signed  by  the  members  of  the 
board,  of  the  amount  paid  up  on  the  new  shares. 

§71.  Alterations  in  the  articles  of  association  shall  be 
registered.  The  directors  shall,  without  delay,  file  an 
application  for  registration,  accompanied  by  two  attested 
copies  of  the  royal  approval  of  the  alterations  in  question. 

§  72.  Changes  in  the  membership  of  the  board  of  direct- 
ors, and  of  those  empowered  to  sign  on  behalf  of  the 
company,  shall  be  immediately  notified  by  the  directors 
for  registration. 


237 


National    M on  et ar y     Commission 

§  73.  A  dissolution  of  the  company,  in  accordance  with 
§  53,  shall  be  immediately  notified  for  registration  by  the 
liquidators,  with  a  statement  of  those  who  are  empowered 
to  conduct  the  liquidation  and  of  those  who  are  empow- 
ered to  sign  on  behalf  of  the  company.  If  any  liquidator 
ceases  to  act,  or  a  new  one  be  appointed,  or  there  be  any 
change  in  those  empowered  to  sign  on  behalf  of  the 
company,  information  in  respect  of  such  changes  shall 
be  immediately  furnished  for  registration  by  the  liqui- 
dators. When  the  liquidation  is  completed  it  shall  be 
the  duty  of  the  liquidators  to  furnish  a  record  of  that 
fact  for  registration  without  delay. 

§  74.  Records  for  registration  shall  be  furnished  in 
writing  and  be  accompanied  by  the  fees  fixed  for  regis- 
tration and  for  the  public  notice  thereof.  In  case  records 
be  sent  by  a  messenger  or  through  the  post  the  signatures 
to  them  shall  be  attested  by  witnesses. 

When  application  is  made  for  the  registration  of  a 
banking  company,  each  of  those  who  are  empowered  to 
sign  on  behalf  of  the  company  shall  at  the  same  time 
write  the  official  signature  in  the  register  or  in  a  special 
supplement  thereto,  unless  the  signatures  are  affixed  to 
the  form  of  notification  and  duly  attested  by  witnesses. 

A  similar  procedure  shall  be  followed  when  a  notifica- 
tion is  made  that  any  person  is  authorized  to  sign  on 
behalf  of  a  company  previously  registered. 

§  75.  Should  registration  be  refused,  anyone  not  con- 
tent to  accept  this  decision  shall  be  entitled  to  appeal  to 
the  King  not  later  than  12  o'clock  on  the  sixtieth  day 
from  the  date  of  the  decision. 


238 


The     Swedish     Banking     System 

§  76.  In  respect  to  banking  companies,  in  addition 
to  the  preceding  provisions  of  §§  64-75,  there  shall  apply 
the  provisions  regarding  registration  in  §§  24  and  68-75 
in  the  law  respecting  joint  stock  companies. 

CHAPTER  VI. — Of  inspection. 

§  77.  Before  a  banking  company  commences  business 
there  shall  be  produced  to  the  local  representative  of  the 
Crown  a  proof— 

That  the  registration  of  the  company  has  been  publicly 
advertised  as  required  in  §  71  of  the  law  respecting  joint- 
stock  companies;  that  at  least  20  per  cent  has  been  paid 
up  on  the  ordinary  capital,  and  that  a  contract  has  been 
entered  into  and  a  pledge  of  security,  approved  by  the 
local  representative  of  the  Crown,  has  been  provided  for 
the  payment  of  the  remainder;  and  that  each  of  the 
ordinary  shareholders  has  furnished  the  company  with 
such  a  declaration  as  is  specified  in  §  19. 

§  78.  It  shall  be  notified  by  advertisement  in  the  Official 
Gazette  when  a  banking  company  begins  its  business  and 
also  when  a  banking  company  is  dissolved  for  other 
reason  than  bankruptcy;  information  of  these  dates  shall 
also  be  sent  to  the  Department  of  Finance. 

§  79.  The  bank  inspector  appointed  by  the  Crown  shall 
be  entitled  to  summon  a  meeting  of  the  board  of  directors 
when  he  judges  it  to  be  necessary  to  do  so.  In  like  man- 
ner the  bank  inspector,  on  the  authority  of  the  head  of 
the  finance  department,  may  summon  a  special  general 

a  The  rendering  "district  governor"  may  perhaps  convey  more  clearly 
the  position  of  the  official  designated  here  and  previously  as  the  "local 
representative  of  the  Crown." 

239 


National    Monetary     Commission 

meeting  of  the  company  if  the  board  of  directors  have 
failed  to  issue  a  summons  for  such  a  meeting  at  the  re- 
quest of  the  inspector.  The  bank  inspector  may  attend 
the  general  meeting,  and  also  the  meeting  of  the  board 
which  he  has  summoned,  and  may  take  part  in  the  dis- 
cussions thereat. 

§  80.  It  shall  be  the  duty  of  the  board  of  directors: 

At  all  times  to  place  the  accounts  and  records  of  the  com- 
pany at  the  disposal  of  the  local  representative  of  the 
Crown,  of  the  officer  appointed  by  him  for  making  such 
inspection,  of  the  bank  inspector,  and  of  any  special  inves- 
tigators who  may  be  appointed,  if  they  deem  it  desirable, 
by  the  Crown  or  by  the  head  of  the  finance  department. 

Immediately  after  the  close  of  each  month,  in  the  pres- 
ence of  an  officer  appointed  by  the  local  representative 
of  the  Crown,  and  in  accordance  with  a  schedule  deter- 
mined by  the  finance  department,  to  draw  up  a  summary 
showing  the  assets  and  liabilities  of  the  company,  and  a 
statement  of  the  rates  of  interest  on  deposits  and  on  loans 
and  the  discount  rates  of  the  company  on  the  day  to  which 
the  summary  applies,  and  to  forward  this  summary  with- 
out delay  to  the  finance  department  for  publication  by 
that  department. 

In  general  to  supply  to  the  head  of  the  finance  depart- 
ment, to  the  bank  inspector,  to  the  local  representative 
of  the  Crown,  and  to  the  officer  appointed  by  him,  all  the 
information  regarding  the  company  which  they  may  de- 
mand ;  on  the  completion  of  the  audit,  to  forward  without 
delay  to  the  finance  department  the  report  of  the  directors, 
the  accounts  and  the  auditors'  report,  and  to  cause  the  last- 


240 


The     Swedish     Banking     System 

named  report  to  be  inserted  in  the  Official  Gazette;  and 
in  case  the  head  of  the  finance  department  finds  reason 
for  supposing  that  the  company  has  incurred  such  losses 
that  the  reserve  fund  and  10  per  cent  of  the  ordinary  capi- 
tal is  lost,  on  demand  made  by  that  official,  to  cause  a  bal- 
ance sheet  to  be  drawn  up  and  to  summon  the  auditors  to 
examine  the  accounts. 

§  81.  It  shall  be  the  duty  of  the  officer  mentioned  in 
§  80  (as  appointed  by  the  local  representative  of  the 
Crown)  to  communicate  to  the  bank  inspector  all  the 
information  relating  to  the  company  which  is  secured  by 
him. 

§  82.  In  that  examination  of  the  administration  of  the 
board  of  directors  and  of  the  accounts  of  the  company 
of  which  §  46  treats,  there  shall  also  take  part  an  auditor 
appointed  by  the  local  representative  of  the  Crown. 

§  83.  If  the  board  of  directors  or  the  general  meeting 
decide  on  a  course  of  action  which  is  in  conflict  with  the 
law  or  with  the  regulations  applicable  to  the  company, 
the  local  representative  of  the  Crown  shall  have  power  to 
forbid  the  carrying  out  of  the  resolution.  He  shall  also, 
in  case  such  a  course  of  action  has  been  entered  upon  as 
is  here  in  question,  have  the  right  to  require  the  directors 
to  correct  the  improper  procedure,  and  also  have  the  right 
to  carry  out  what  the  law  and  the  company's  articles  of 
association  require  of  the  directors.  Such  a  demand  on 
his  part  may,  however,  not  be  made  in  cases  in  which 
the  breaches  of  the  law  which  are  in  question  are  pun- 
ishable under  the  criminal  code,  and  in  questions  relating 
to  the  management  or  bookkeeping  of  the  company  the 

22150 — 10 16  241 


National    Monetary     Commission 

prohibition  or  demand,  to  which  reference  is  here  made, 
may  not  be  issued  by  the  local  representative  of  the 
Crown  except  at  the  instance  of  the  bank  inspector. 

In  more  serious  cases  of  deviation  from  the  provisions 
of  the  law  or  of  the  articles  of  association  of  the  com- 
pany, the  King  may  declare  the  company's  charter 
forfeited. 

§  84.  If  a  breach  of  the  provisions  of  §  10,  paragraph 
3,  take  place,  the  local  representative  of  the  Crown  shall 
have  power  to  require  its  cessation. 

§  85.  When  communicating  any  caution  or  prohibition 
under  this  law,  the  local  representative  of  the  Crown  shall 
have  power  to  determine  the  amount  of  the  fine  in  respect 
thereof,  and  to  impose  the  same. 

§  86.  Appeal  may  be  made  to  the  King  in  respect  of 
any  decision  of  his  local  representative  in  matters  arising 
out  of  this  law,  but  the  decision  shall  go  into  effect  unless 
the  King  orders  otherwise. 

§  87.  If  a  banking  company  be  dissolved  for  any 
reason  other  than  is  specified  in  §  59,  the  head  of  the 
finance  department  shall  appoint  an  officer  who  shall 
attend  the  meetings  of  the  liquidators,  with  the  right  to 
take  part  in  their  discussions  and  generally  to  watch  the 
course  of  the  liquidation. 

§  88.  The  banking  company  shall  be  required  to  remu- 
nerate the  officers  appointed  in  accordance  with  §  §  80  and 
87,  and  the  auditor  mentioned  in  §  82.  The  authorities 
which  appoint  the  said  officers  or  auditor  shall  have  the 
determination  of  the  amount  of  such  remuneration. 


242 


The     Swedish     Banking     System 

CHAPTER  VII. — Regulations  in  regard  to  penalties. 

§  89.  Whoever  in  a  notification  for  registration  shall 
knowingly  make  a  false  statement,  shall  be  liable  to  a  fine 
of  not  less  than  50  nor  more  than  2,000  kroner,  unless 
the  offense  be  one  for  which  punishment  is  provided  in 
the  criminal  law. 

The  same  shall  hold  in  case  a  director  knowingly  causes 
false  entries  to  be  made  in  the  book  referred  to  in  §  22. 

§  90.  Anyone  offending  against  the  regulations  laid 
down  in  §  13  (par.  2)  or  §  16  (par.  2)  or  any  director  fail- 
ing to  regard  the  notifications  made  under  §  22,  §  66,  §  67 
(par.  2),  or  §§  68,  69,  70,  71,  or  72,  shall  be  liable  to  a  fine 
of  not  less  than  5  nor  more  than  500  kroner. 

The  same  shall  hold  for  a  liquidator  who  does  not  fulfill 
the  duties  laid  upon  him  by  §  73. 

§  91.  Fines  and  penalties  which  are  exacted  under  this 
law  shall  be  paid  to  the  Crown.  In  case  of  inability  to 
pay  such  fine  or  penalty  in  full,  the  substitutionary  punish- 
ment shall  be  such  as  is  fixed  in  the  ordinary  law. 

CHAPTER  VIII. — Special  regulations. 

§  92.  Should  the  directors,  liquidators,  or  shareholders 
transgress  the  provisions  of  this  law  or  of  the  articles  of 
association,  they  shall  be  liable  for  all  the  injury  resulting 
therefrom,  each  for  all  and  all  for  each. 

§  93.  The  articles  of  association  of  a  banking  company 
shall  specify — 

1.  The  official  title  of  the  company. 

2.  The  classes  of  business  which  may  be  undertaken  by 
the  bank. 

3.  The  place  in  which  the  administrative  offices  shall 
be  situated. 

4.  The  amount  of  the  ordinary  capital  or,  in  case  the 
ordinary  capital  may,  without  alteration  of  the  by-laws, 

243 


National    Monetary     Commission 

be  fixed  at  a  greater  or  less  amount,  the  minimum  capi- 
tal and  the  maximum  capital. 

5.  The  amount  of  the  face  value  of  each  share. 

6.  Whether   shareholders   en  commandite  may   be   ad- 
mitted to  the  company,   and  if  this    be    permitted  the 
amount  of  the  share  in  the  profits  to  which  such  share- 
holders shall  be  entitled,  and  in  general  those  regulations 
which  are  found  desirable  for  such  a  case. 

7.  The  number  of  directors,  and  of  substitutes  for  them, 
the  time  of  their  election,  and  the  powers  intrusted  to  the 
board  of  directors. 

8.  Whether  more  than  one  ordinary  general  meeting 
shall  be  held  yearly,  the  time  and  place  for  holding  such 
meetings,  and  the  nature  of  the  business  to  be  transacted 
at  the  ordinary  meeting  or,  if  more  than  one  be  held,  at 
each  of  them. 

9.  The  manner  in  which  general  meetings  shall  be  sum- 
moned and  other  information  communicated  to  the  ordinary 
shareholders. 

10.  The  regulations  for  voting  at  general  meetings  and 
for  decisions  of  such  meetings  so  far  as  they  may  differ 
from  what  is  laid  down  in  respect  to  these  matters  in  §§ 
37  and  38. 

11.  The  number  of  auditors  and  of  substitutes  for  them, 
the  time  of  their  election,  and  the  time  at  which  they  shall 
audit  the  accounts. 

§  94.  In  questions  not  otherwise  provided  for  by  law,  a 
banking  company  shall  be  within  the  jurisdiction  of  the 
lower  courts  in  the  place  in  which,  in  accordance  with  the 
by-laws,  the  administrative  offices  are  situated. 

§  95.  The  relations  of  clients  to  a  banking  company  may 
not  be  made  public. 

244 


The     Swedish      Banking     System 

§  96.  [Contains  a  list  of  laws  repealed  by  the  present  act.] 

§  97.  This  law  shall  be  in  force  from  January  i,  1904. 
Nevertheless  the  provisions  of  §  10  (par.  3)  shall  not  apply 
to  companies  which  have  obtained  the  royal  approval  of 
their  by-laws  before  this  law  shall  be  in  force,  and  §§28 
and  29  in  the  royal  ordinance  of  June  21,  1874,  respecting 
enskilda  banks  with  the  right  of  issuing  their  own  bank 
notes  and  the  second  paragraph  in  the  law  of  May  27, 
1898,  respecting  enskilda  banks  which  have  resigned  their 
rights  of  note  issue,  shall  continue  in  force  as  regards  each 
such  bank  until  the  liability  of  the  bank  in  respect  of 
outstanding  notes  shall  cease. 

Questions  regarding  rights  and  obligations  arising  before 
this  law  goes  into  force  shall  be  decided  in  accordance  with 
previous  statutes. 

The  Crown  shall  issue  the  transitional  regulations  which 
may  be  found  requisite  in  regard  to  the  registration  of 
banking  companies  whose  by-laws  have  been  approved 
before  this  law  goes  into  force. 

On  application  from  any  enskilda  bank  which  has  had 
the  right  of  note  issue  the  King  will,  unless  the  bank  is  in 
the  hands  of  a  receiver,  issue  a  proclamation  notifying 
everyone  who  may  be  in  possession  of  any  note  of  the  bank, 
to  present  such  note  for  redemption  at  the  bank  within 
two  years  from  the  date  of  the  proclamation,  or  lose  all 
right  to  payment  thereof.  At  least  four  times  in  each  of 
the  years  the  proclamation  shall  be  read  in  the  churches 
of  the  Kingdom  and  inserted  in  the  Official  Gazette. 

NOTE. — The  law  of  the  same  date  respecting  banks  with  limited  liability 
follows  closely  the  terms  of  the  above  law,  except  in  regard  to  those  matters 
in  which  the  differences  in  the  extent  of  the  liability  of  shareholders  requires 
differences  in  the  terms  of  the  statutes. 

245 


National    Monetary     Commission 


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posits  at  the  Riksbank 
Due  from  other  banks  in  Sweden 
Due  from  foreign  banks  and  bank 
Sight  drafts  and  short-dated  bill; 
notes 

Interest-bearing  securities  
Shares 

Bills  discounted  and  purchased: 
Inland  bills.  No.  .val 

*T 

C 

£ 

c 
b 

1 

Outstanding  loans: 
Secured  on  real  estate,  No._  . 
Secured  on  bonds,  No  
Secured  on  shares.  No. 

E     g 

III 

o/y  u 

Secured  on  guaranties,  No  
Outstanding  on  credits  opened  
Credit  granted  .  
Number  of  accounts  
Outstanding  on  overdrafts  _  . 
Credit  granted  _  
Number  of  accounts  
Other  assets 

Overdue  debts  on  which  proc< 
taken 

Due  by  bankrupts  or  firms  in  liqi 

Total  __ 

-2   *>• 


«  0 


246 


The     Swedish     Banking     System 

The  following  is  appended  to  the  monthly  account : 

I  hereby  declare  that  the  cash  in  hand  of  the Bank 

at  the  close  of  business  on was  verified  by  me  and  found 

both  as  a  whole  and  as  to  the  different  items  specified  to  be  in  agreement 
with  this  summary,  and  that  the  other  statements  therein  are  in  agreement 
with  the  bank's  accounts,  having  examined  and  investigated  the  same. 


(This  certificate  is  signed  by  the  official  appointed  as 
required  in  §80.) 

Rates  of  interest  paid: 

On  savings  accounts 

On  current  accounts 

On  deposits  at — 

One  month's  notice 

Two  months'  notice 

Three  months'  notice 

Four  months'  notice 

Six  months'  notice 

Rates  of  interest  charged: 

On  loans  secured  on — 

Real  estate 

Other  collateral  or  on  guaranties 

On  open  credits — 

Interest 

Commission 

On  discounted  bills — 

Of  not  exceeding  three  months'  currency 

Of  longer  currencies 1 


(The  rates  are  to  be  those  in  force  on  the  last  business 
day  of  the  month.) 

NOTE. — The  monthly  summary  should  be  forwarded  to  the  department 
of  finance  as  soon  as  possible,  and  it  is  desirable  that  it  should  be  despatched 
early  enough  to  be  received  by  the  6th  of  the  month  next  following  that  to 
which  it  refers. 

In  the  preparation  of  the  summary  it  is  of  special  importance  that  no 
variation  be  made  from  the  prescribed  form.  The  items  should  be  specified 
in  the  order  therein  set  forth,  and  if  any  of  the  headings  do  not  apply  to  a 
bank,  they  should  not  be  deleted,  but  inserted  with  a  space  for  the  amount 
left  blank. 


247 


National    Monetary     Commissio 


n 


FORM  FOR  THE  ANNUAL  SUMMARY  OF  BANK  ACCOUNTS. 

Statement  of  the Banking  Company's  position  at  the  close 

of  the  year ,  after  the  disposition  of  the  profits  for  the  year. 


Kronor. 

Ore. 

Kronor. 

Ore. 

The  capital  of  the  bank  on  January 

I     10 

Ordinary  capital 

Hn  commanditefunda 

Reserve  fund 

Available    surplus    (including 
special  funds  or  suspense  ac- 
counts)          _   

Gross  profits 

Applied  from  capital  resources  in 
the  course  of  the  year 

Management  expenses 

Management   expenses    as    a 
percentage  of  gross  profits  

Management    expenses  as   a 
percentage  of  ordinary  capi- 
tal and  en  cortwnandite  fund 

Written  off 

Net  profits 

Net  profits  as  a  percentage  of 
the  capital  on  January  i,  19 

Applied  by  the  bank  to  — 
Reserve  fund     

Surplus 

Dividends  — 
On  ordinary  capital 

On  en  commandite  fund 

Percentage  dividend  on  ordi- 
nary capital                _   _   _  _    _ 

Increase  of  funds  by  issue  of  new 
shares                   -           ~   

The  capital  of  the  bank  on  Decem- 
ber ^I    IQ 

Overdue  debts  in  respect  of  which  legal  proceedings  have  been 
taken : 

Number 

Amount  _. 


This  item  is  not  applicable  in  the  case  of  limited-liability  banks. 

9 


THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 
STAMPED  BELOW 


AN  INITIAL  FINE  OF  25  CENTS 

WILL  BE  ASSESSED  FOR  FAILURE  TO  RETURN 
THIS  BOOK  ON  THE  DATE  DUE.  THE  PENALTY 
WILL  INCREASE  TO  SO  CENTS  ON  THE  FOURTH 
DAY  AND  TO  $I.OO  ON  THE  SEVENTH  DAY 
OVERDUE. 


I      JUN194S 

61 

LD  21-100^-12,  '43  (8796s) 

213 


